In 2018, Telegram announced its intention to build Telegram Open Network (TON) blockchain and opted to use Initial Coin Offering (ICO) in raising capital for the project. Following this revelation, the social network company joined several other technology companies like Facebook, WhatsApp and Signal in aspirations of building blockchain networks and even issuing cryptocurrencies.

However, most of these blockchain projects have not gone down well especially with the Security Exchange Commission (SEC) in the US. Facebook, for example, has faced rigorous case battles aimed at its Libra cryptocurrency making hard for the company to go ahead with the project.

Telegram, on the other hand, decided to throw in the towel at the beginning of May 2020 after a long court battle with the Security Exchange Commission in the USA. Let us look at the sequence of events that led Telegram to abandon its blockchain project.

Telegram Open Network (TON)

TON, the designated blockchain network that Telegram is set to launch, is intended to offer decentralized cryptocurrency, called Gram, to the users of Telegram who have smartphones.

The cryptocurrency was largely viewed as a rival to the much-publicized Libra of Facebook. However, both cryptocurrencies (Libra and Gram) have faced significant scrutiny by the SEC, which has greatly hampered their development and issuance.

Telegram Pre-ICO in 2018

The messaging app established by the Russian tech expert, Pavel Durov, conducted a Pre-ICO early 2018 raising $1.7 billion from about 171 investors. However, the firm got into trouble after it emerged that about 39 of those investors were from the USA and the SEC had its reservations since the company had not registered the pre-sale.

After, the Pre-ICO, investors were very eager to cash in in the much-hyped ICO. However, the SEC stepped in and ordered Telegram to halt the post-ICO sale due to issues it raised with how its pre-ICO was conducted.

The legal battle

SEC launched a vicious legal battle against Gram ICO in October 2019, after ordering Telegram not to go ahead with its much anticipated Post-ICO.

The SEC accused Telegram of conducting an unregistered token sale to USA citizens. As a result, SEC pressured Telegram to disclose financial documents and answer a couple of questions to shed more light on the disposition of the investors’ funds it raised through the 2018 pre-ICO as required by its regulations.

In March 2020, a US judge dealt a blow to Telegram’s TON project by ruling that it cannot launch the blockchain network nor issue the Gram tokens before the case is settled. This led to a postponement of its April 30, 2020 deadline to launch TON.

However, it was also an early win for Telegram since the same judge barred the SEC from fully accessing Telegram ICO’s financial and banking details. Initially, Telegram’s lawyers had urged the court to throw out the case.

After, the court ruling in March, Telegram wrote to the court promising to issue the required information on the token distribution to investors and the funds collected from the investors to the SEC. Telegram was also to provide the SEC with all the communications, written agreements and amendments of the token sale agreements (including cancelling of the contracts).

All along the court battles were badly hurting the TON project after several postponements until the deadline for the activation of the refund clause in the Telegram’s purchase agreements was reached.

The refund for Gram investors

With the nearing April 30, TON launch deadline, and without any hope in sight for the launching of the blockchain network, investors had the rights to claim for refund as stipulated in Telegram’s purchase agreements refund clause.

According to the refund clause, investors could ask for a 72% refund.

The firm specifically urged the US investors who had invested with it to immediately agree the 72% refund so that they could pull out, claiming that there is an uncertain regulatory environment in the US.

To the investors from other parts of the world, Telegram offered a refund of 110% if they wait till April 30th, 2021.

“As a token of gratitude for your trust in TON, we are also offering you an alternative option to receive 110% of your original investment by April 30, 2021, which is 53% higher than the Termination Amount”

Telegram also announced that the company would allow investors who wait till 2021 to receive Gram or another cryptocurrency on the same term as to what was in the original Gram agreement.

“Purchasers who opted for the loan will have the further option to receive Grams or potentially another cryptocurrency on the same terms as those in their original Purchase Agreements.”

Throwing in the towel

Sadly, after all the drama with the SEC, and trying to retain investors with lucrative 110% returns if they held on till 2021, Telegram finally decided to abandon its TON project.

Early May 2020, Pavel Durov, the founder and CEO of Telegram, announced that telegram had stopped any further involvement with TON.

“Telegram’s active involvement with TON is over………You may see – or may have already seen – sites using my name or the Telegram brand or the ‘TON’ abbreviation to promote their projects. Don’t trust them with your money or data,” Pavel Durov wrote on his channel.

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