Encrypted messaging app Telegram has decided against holding a public initial coin offering (ICO) to fund the development of its “third-generation blockchain.”
Citing sources familiar with the matter, the Wall Street Journal reports that the Pavel Durov-led firm determined that it is pleased with the $1.7 billion it had raised for the Telegram Open Network (TON) and prefers not to undergo the operational and regulatory hassles of opening the offering to the general public.
Telegram has been notoriously opaque about its token sale, with even prospective investors complaining about an inability to convince the company to provide them with concrete details about the offering.
Nevertheless, documents filed with the Securities and Exchange Commission (SEC) reveal that the company held two funding rounds between January and March and that each raised $850 million.
Fewer than 200 investors contributed to the token sale, which was restricted to institutional investors and high net worth individuals who have undergone accreditation.
The token sale has been conducted under Rule 506(c) of Securities Act Regulation D, which stipulates that companies can sell unregistered securities if they restrict the sale to accredited investors, report the funding round to the SEC, and subject investors to a predefined vesting period.
Initial reports indicated that firm may have hoped to raise as much as $5 billion through a private presale and a public ICO. However, one source told the publication that the regulatory winds have shifted since it first began planning the sale. Indeed, the SEC has stepped up its enforcement of ICOs in recent months, and it alleges that most of these token sales are unregistered securities offerings operating in violation of federal law.
Earlier this week, Iran’s government issued an order prohibiting its citizens from using Telegram’s messaging platform. The ban was likely primarily connected to its usage among organizers of recent protests in the country, but the company’s plans to launch its own cryptocurrency appear to have played a role as well.
As Bittox reported, at least one high-ranking Iranian official had warned that the new company’s new cryptocurrency could enable residents to evade capital controls and funnel $50 billion out of the country annually.