Messaging company Telegram has allegedly opted not to proceed with the public round of its initial coin offering (ICO) after raising $1.7 billion from two separate private pre-sales, deciding that the project doesn’t need additional funds.
Citing a “person familiar with the matter,” the Wall Street Journal reported on May 2 that Telegram has “brought in so much money” from private, accredited investors during its two pre-sale rounds that the company is “calling off a planned sale of cryptocurrency to the wider public.”
Led by brothers Pavel and Nikolai Durov, Telegram was launched in 2013 with funds that Pavel raised after he sold his shares in VK, the largest social network in Russia. It has since grown to over 200 million users worldwide.
A whitepaper leaked in January 2018 detailed plans for the Telegram Open Network (TON) project, which aimed to build a “third-generation” blockchain platform to compete with the likes of Ethereum which allegedly had the potential to “become a Visa/Mastercard alternative.”
Transactions on the TON platform will be conducted in a new cryptocurrency yet to be developed. Telegram offered a percentage of the total supply of this new cryptocurrency to accredited investors through a Simple Agreement on Future Tokens (SAFT).
Two Form D documents filed with the US Securities and Exchange Commission (SEC), one in February and one in March, confirm that Telegram’s TON project raised two rounds of $850 million each in two separate pre-sale events between January and March 2018.
175 accredited investors, both institutional clients and high net worth individuals, contributed a total of $1.7 billion to the TON project, making it the largest ICO to date in terms of funds raised.
The TON token sale was conducted under Rule 506(c) of Securities Act Regulation D, under which companies can sell unregistered securities if they restrict the sale to accredited investors, file the funding round with the SEC, and require investors to go through a predefined vesting period.
Although one source told the WSJ that Telegram canceled its public sale because the company decided it had raised enough money, a different unnamed source “familiar with the company” indicated that the changing regulatory environment also may have played a role. According to the WSJ, lifting restrictions on investors “could open up the company’s executives to more scrutiny” by regulators such as the SEC.
Japanese messaging app Line and South Korean messaging app Kakao have also announced plans to develop new blockchain platforms.