Telegram to Refund Money from GRAM ICO? Perhaps.

Last Thursday, a letter posted on the Russian website of SmartLab said that Telegram will offer GRAM purchasers the option to receive their money back as the deadline for the issuance of the tokens had passed.

Telegram has been in an ongoing legal battle with the Securities and Exchange Commission (SEC). Defended by Skadden, Arps, Telegram is not going down without a battle but so far the smart money is on the Feds to win.

Last October, the SEC filed an emergency action and obtained a temporary restraining order against Telegram. In brief, the SEC alleges an unregistered digital security offering in the U.S. which was also sold to foreign investors. Telegram sold about $1.7 billion in a SAFT (simple agreement for future tokens) with about 39 US purchasers committing $424.5 million. Telegram did, in fact, file a Form D with the SEC.

A good discussion of the case is available here.

In the letter, which is reproduced below, Telegram sais that in accordance with the Purchase Agreement, the company will repay 72% of the original investment. But, if you decide to stick around for another year, Telegram will provide an option to receive 110% of the investment or 53% more than the amount the company will pay out now.

So how will Telegram make up the difference in what may be in the bank and what will be owed a year from now. Sale of equity in the company that is closely held.

So is that a good deal? Hard to tell without the benefit of knowledge of the future but just last week, Telegram reported having topped 400 million users with 1.5 million signing up every day. That’s a lot of new users. Typically, social media platforms are valued on their user ranks. For example, Facebook may be valued at about $220 per users depending on the day. If you use Facebook as a benchmark, Telegram should do fine in the more traditional equity markets.

In the interim, the SEC v. Telegram lawsuit drags on.

As posted on SmartLabs.

Unfortunately, in light of the recent US district court decision, we are unable to issue Grams to you by the 30 April Deadline Date. Accordingly, under the terms of the Purchase Agreement, we owe you the Termination Amount. We are hereby honouring our plan communicated to you in October 2019 to repay 72% of your original investment.

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.

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 (to the extent allowed by applicable regulatory restrictions).

In case the relevant permissions are not obtained by April 30, 2021, Telegram intends to repay the debt using the proceeds from the sale of equity in the company, which is currently owned by its founder. With 400 million monthly users and an organic growth of 1.5 million sign-ups each day, Telegram is the #1 most downloaded social media application in 27 countries, including India, Indonesia, Turkey, Russia, Egypt and Brazil (as reflected in the App Store rankings as of April 29, 2020). Based on the valuation of messaging services at similar stages of their growth, we believe Telegram’s equity value will exceed the aggregate amount of its potential debt resulting from this offer by at least several times.

By the end of the week, please let us know by reply email whether you elect to proceed with the repayment of the Termination Amount, or whether you are interested in reviewing the loan option. If you prefer the former, please find attached a Repayment Form which you should complete and return to us at your soonest convenience. If you elect the latter, we will send you the legal documents for the loan by early next week for your review, with closing expected shortly thereafter (or repayment of your Termination Amount if you ultimately decide not to proceed with the loan).

We are thankful for your trust and support over the last two years. We are very proud of the technology we built for TON, and regret that the project has not yet been permitted to launch.

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