Telegram Lost Fight to SEC Over TON Blockchain Project
Telegram was not able to convince a US court to go ahead with its blockchain system called TON. This was announced by Telegram CEO, Pavel Durov on Friday. In a filing on Friday, the messaging app provider said it was withdrawing its appeal over a previous court decision that backed the SEC in prohibiting the issuance of “gram” tokens to investors both in and out of the U.S.
The new document filed with the U.S. Court of Appeals for the Second Circuit states: “The parties in the above-referenced case have filed a stipulation withdrawing this appeal pursuant to Local Rule 42.1.”
The rule means the parties have filed an agreement for dismissal of the case without prejudice. As such, the case is over for now, but not necessarily forever.
TON, from Grain to Grave
Telegram raised $1.7 billion in a private token sale in early 2018 to develop a blockchain for their platform. They later named it the Telegram Open Network or TON. The project was halted by the SEC for violating U.S. securities law in October, only weeks before its scheduled launch.
After six months of written arguments from both sides and one hearing in the U.S. Southern District Court in New York, Judge Kevin Castel supported the initial preliminary injunction barring Telegram from issuing tokens to investors, on March 24. Telegram moved immediately to appeal but that effort died with Friday’s filing.
On May 12, Telegram’s CEO Pavel Durov announced in a blog post that Telegram would no longer be developing TON. The post was Durov’s first public statement about the project, which had been going on largely in secret.
What Happens to TON Investors Now?
Gram investors have now been given two options: either take back 72% of their investment in TON, according to the previously agreed contract amendment, or loan the money to Telegram for one year, with a promise of getting 110% in April 2021. U.S. investors had only the first option to choose.
Some investors told CoinDesk they had already received their refunds while others said they had taken the loan route. However, a number have been unhappy with the outcome and said they are considering suingTelegram. We don’t know if any investor filed a lawsuit or not because the information is not publicly available.
The TON project may not be completely dead, however. Earlier this month, a group of professional validators launched a forked version of the blockchain, named Free TON, with the technical support of TON Labs, a startup that previously helped Telegram with the project.