Telegram’s battle with the United States Securities and Exchange Commission (SEC) appears to have reached its end. However, the mobile messaging platform now has a hefty price tag to pay in order to disappear from the regulator’s radar for good.
A Months-Long Battle Closes
On Friday, Judge Kevin Castel of the United States District Court for the Southern District of New York signed the final judgment for the Telegram v. SEC case, which has been ongoing for months. As the verdict’s document shows, the mobile messaging company will have to make a $1.2 billion payment to investors who participated in its Initial Coin Offering (ICO) for the failed Telegram Open Network (TON) blockchain project and GRAM digital asset.
The SEC had inquired the court to pass the judgment two days earlier. In its proposed final judgment, the regulator explained that $1.19 billion of the money represented the amount that Telegram had paid for termination amounts – virtually, original contracts that the company agreed to pay investors.
Asides that, the Telegram Group was also liable for a civil penalty of $18.5 million, which the company will have to pay to the SEC. The document confirmed that telegram had agreed to make the civil penalty payment, as both parties had reached an agreement for that fee earlier this month.
Speaking on the approval of its rule change, the SEC said that it had sued Telegram for a crime – not in a bid to stifle innovation in the tech or financial spaces. The agency explained that it always appreciates companies’ efforts to innovate, but there are guidelines that it has to maintain.
In part, the regulator explained, “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.”
Telegram’s Very Bad Week
When it proposed the rule verdict, the SEC asked for Telegram to make its payment no later than 30 days after the proposed judgment’s entry. Apart from the disgorgement and civil penalties, the final verdict states that Telegram would have to notify the SEC before it conducts any crypto token sale for the next 36 months.
It’s unclear whether Telegram has the funds to make such a payment, or whether it will need a little time. However, such news couldn’t come at a worse time for the company.
Just two days before the verdict came to light, Russian-language tech publication Kod.ru reported that the company had suffered a significant data leak that led to the release of a database that contained millions of Telegram users’ data on the Dark Web.
The report explained that the database contained phone numbers and unique Telegram identification details. Telegram also reportedly confirmed the data breach to the news source, explaining that the hackers could collect the database by exploiting the platform’s build-in contacts import feature when users register.
However, the company also noted that a lot of the data in the database was outdated. The report explains that about 84 percent of the entries in the database were collected before the second half of 2019. This primarily means that about 66 percent of the information on the platform is outdated.