Messaging startup Telegram Group Inc. is close to settling its case with the U.S. Securities and Exchange Commission over its sale of Gram cryptocurrency for its TON blockchain network in 2018.

Under the terms of a proposed settlement made public today, Telegram has agreed to pay a penalty of $18.5 million to the SEC as well as agree to return some of the monies raised in the token offering. The settlement also specifies that Telegram must give the SEC at least 45 days notice on any plans it has to launch any cryptocurrencies, digital coins, tokens or similar digital assets issued or transferred using digital ledger technology.

The settlement will put a close to a case that started with the SEC obtaining a temporary restraining order on Telegram’s token sale in October. The restraining order claimed that the token sale — which raised $1.7 billion in pre-sales, one of the biggest raises in blockchain history — was offered as an unregistered security.

At all stages, the money raised was declared in filings with the SEC. Telegram contended the money raised was done so legally, whereas the SEC argued the offering should have been registered under the Securities Act of 1933.

Telegram initially argued against the restraining order, losing a court case in March where a U.S. District Judge ruled that the SEC had demonstrated a plausible case that Telegram sold unregistered securities in breach of U.S. securities law.

With things not going its way, Telegram announced it was abandoning its TON blockchain project on May 12. The company dropped its appeal against the SEC ruling May 25.

Telegram originally offered U.S. investors two options to have their funds returned: Take 72% of their original investment immediately or loan the money back to Telegram with a guarantee of getting back 110% of the total invested funds in April 2021.

Under the terms of the proposed settlement, Telegram must return 70% of the $1.7 billion raised, or $1.224 billion, specifically “the unspent portion of the monies raised from investors” minus any money Telegram as already refunded or any money that investors have offered to loan Telegram.

“Today’s proposed settlement reconfirms our commitment to repay the remaining funds to purchasers under the Purchase Agreements,” Pavel Durov, chief executive officer of Telegram, said according to Decrypt.  “We’ve already repaid more than $1.2 billion to the purchasers either directly or in the form of loans.”

The proposed settlement, which is supported by both Telegram and the SEC, is now waiting approval from the Southern District of New York court.

Image: Telegram