Instant messaging app Telegram wowed the cryptoeconomy in early 2018 when its team raised nearly $2 billion USD for the Telegram Open Network (TON) blockchain upon the firm’s Gram token sale. Yet that token offering has now turned out to be a major strategic mistake.
Indeed, in the wake of the Gram token sale, Telegram faced a high-profile lawsuit from the U.S. Securities and Exchange Commission (SEC). That lawsuit alleged the messaging company’s Gram offering was an unregistered security per U.S. federal law. Telegram pushed back accordingly, and a court battle ensued.
Unfortunately for Telegram, then, the messenger app’s blockchain effort has nowhere else to turn for now after U.S. District Judge P. Kevin Castel of the Southern District of New York ruled last month that Telegram can’t launch its blockchain amid the SEC’s ongoing lawsuit.
That decision has stayed in place since then, which has forced Telegram’s hand in kind. In a letter sent out to Gram investors this week, the Telegram team declared it was delaying the TON blockchain’s launch until April 2021 and offering Gram investors a partial refund.
The move comes after the Telegram team previously asked Gram investors to accept a delayed launched date of April 2020 after the messenger app’s token was originally slated to launch in 2019. At the same time as that request, Telegram was arguing in court that the Gram wasn’t a security.
That argument now looks dead in the water, per this week’s events.
A Major Walk Back
In Telegram’s latest letter to Gram investors, the company said that it was now eyeing next spring for the launch of TON and the Gram upon the aforementioned “US district court decision.”
Accordingly, Telegram said that because of the launch delay it was now contractually obliged to repay at least 72% of investors’ original investments. However, to make good of a sour situation, the company assured investors that it was willing to do much better than the 72% that investors were minimally owed:
“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. Detailed documents describing this option, including a loan agreement, will be provided shortly to those who express interest.”
What Happens Next?
Telegram plans to launch its premier blockchain and associated token next spring, but that all depends on if the company’s legal situation has improved by then. If the firm is still mired in a legal battle with the SEC, which is possible, then an April 2020 launch may not happen after all.
However, if Telegram’s legal mire has cleared up by then, then the company plans to proceed with the TON roll out, the firm explained:
“We are continuing to engage in discussions with the relevant authorities in connection with TON and the issuance of tokens to the original purchasers. If we obtain the relevant permissions prior to April 30, 2021, 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.”
Should Telegram Have Been Less Defensive?
Much has been said in the cryptoeconomy about whether Telegram could have done itself some favors in not going toe to toe with the SEC in court.
Of course, the law is the law, so if Telegram ran afoul of it, then there’s only so much that can be done. Yet more than a few analysts have argued that Telegram would have seen much more leniency from the SEC if it didn’t go to war with the Commission over the Gram token sale.