SEC orders Telegram Group to give back $1.2 Billion to investors for unregistered digital tokens and pay $18.5 million penalty

The Securities and Exchange Commission (SEC) has ordered the Telegram Group Inc. (Telegram) and its wholly-owned subsidiary, TON Issuer Inc to repay $1.2 Billion to investors for violating federal securities laws in their unregistered offering of digital tokens called “Grams.” Telegram must return more than $1.2 billion to investors and to pay an $18.5 million civil penalty. Telegram , according to the SEC, sold 2.9 billion Grams to 171 initial purchasers worldwide in order to raise capital to finance its business. The SEC characterizes these Grams as securities and Telegram failed to register them as such. The SEC also enjoined Telegram from violating the registration provisions of Sections 5(a) and 5(c) of the Securities Act of 1933. It also ordered Telegram to disgorge $1,224,000,000 in ill-gotten gains from the sale of Grams, pay a civil penalty of $18,500,000, and give notice to the SEC staff before participating in the issuance of any digital assets for the next three years.

“New and innovative businesses are welcome to participate in our capital markets but they cannot do so in violation of the registration requirements of the federal securities laws,” said Kristina Littman, Chief of the SEC Enforcement Division’s Cyber Unit. “This settlement requires Telegram to return funds to investors, imposes a significant penalty, and requires Telegram to give notice of future digital offerings.”

On August 31, the SEC posted a Notice of Covered Action in reference to the case. This notice signals that the SEC is now accepting whistleblower award applications for the case. Individuals who voluntarily provided the SEC with original information that led to this successful enforcement action are entitled to file for a monetary award of 10-30% of the funds the government recouped.

Jeffrey Newman represents whistleblowers nationwide, including SEC whistleblowers in cryptocurrency cases and other violations of security laws. He can be reached at 978-880-4758 or at Jeffrey.newman1@gmail.com.