Telegram to return $1.2 billion to investors and pay $18.5 million penalty to settle SEC ChargesChristian Fernsby ▼ | June 27, 2020
The Securities and Exchange Commission announced that it obtained court approval of settlements with Telegram Group Inc. and its wholly owned subsidiary TON Issuer Inc. to resolve charges that Telegram's unregistered offering of digital tokens called Grams violated the federal securities laws.
Topics: Telegram SEC
On Oct. 11, 2019, the SEC filed a complaint against Telegram, alleging that the company had raised capital to finance its business by selling approximately 2.9 billion Grams to 171 initial purchasers worldwide.
The SEC sought to preliminarily enjoin Telegram from delivering the Grams it sold, which the SEC alleged were securities that had been offered and sold in violation of the registration requirements of the federal securities laws.
On March 24, 2020, the U.S. District Court for the Southern District of New York issued a preliminary injunction barring the delivery of Grams and finding that the SEC had shown a substantial likelihood of proving that Telegram's sales were part of a larger scheme to unlawfully distribute the Grams to the secondary public market.
Without admitting or denying the allegations in the SEC's complaint, the defendants consented to entry of a final judgment enjoining them from violating the registration provisions of Sections 5(a) and 5(c) of the Securities Act of 1933.
The judgment orders defendants to disgorge, on a joint and several basis, $1,224,000,000 in ill-gotten gains from the sale of Grams, with credit for the amounts Telegram pays back to initial purchasers of Grams, and also orders Telegram Group Inc. to pay a civil penalty of $18,500,000.
Telegram is further required, for the next three years, to give notice to the SEC staff before participating in the issuance of any digital assets. ■