The Securities and Exchange Commission stepped in and put an end to Telegram’s TON crypto token. This week, Telegram settled with the SEC for $18.5 million and intends to return the remaining ICO funds to investors.

But after commissions paid to venture capitalists and retail investor premiums, the refund process is likely to be a big mess. With so many loopholes and money changing through greedy hands along the way, will retail investors ever see a full refund?

Remembering the Historic ICO That Raised a TON of Money

Telegram is a private, “heavily encrypted” cloud-based instant messaging and voice over IP service. The messaging app is particularly popular with crypto users due to the privacy features offered. Accounts can even “self destruct” after a period of inactivity.

Its popularity with crypto users prompted the company to attempt to monetize the platform through the debut of a crypto protocol and token: TON, or Telegram Open Network.

Telegram raised over $1.7 billion from investors in the TON initial coin offering in 2018. Investors flocked to the TON token in droves.

Come October 2019, however, the United States Securities and Exchange Commission filed suit against the company for an unregistered securities offering.

Telegram refused to admit any wrongdoing but this week settled with the SEC for $18.5 million in fines. Telegram also agreed to return $1.2 billion worth of the remaining $1.7 billion in funds raised during the ICO.

But returning those funds, this far after the funds being raised and after changing through so many hands, will be messy.

$1.2bn refund to Telegram (TON) investors

Probably 3/4 of that was syndicated downward toward retail investors. In some cases at a premium.

Commissions were taken by VCs.

Will these retailers even get their cash back?

Big mess.

— Charles Read (@chatwithcharles) June 29, 2020

Retail Investors May Never See Full Refund From Telegram Token Offering

Telegram’s TON initial coin offering, being a high-profile ICO, meant it had a more convoluted investment process than most others.

Typically, ICO investors would send BTC or ETH to a whitelisted crypto wallet address during a pre-sale phase. When the ICO launched, the newly issued tokens would then be deposited into a corresponding supplied crypto wallet.

With Telegram’s TON, according to a well-known crypto investor, three-quarters of that sum was “syndicated downward toward retail investors” at a premium.

Along the way, venture capitalists offering exposure to the ICO to clients would have taken commissions. VCs often take high commissions – commissions that were taken some two years ago at this point.

Even if the accounting nightmare is ever sorted, it will likely be the smallest time retail investors that lose out the most in the fallout of the historic ICO. Retail investors may never get all of their cash back, if at all.

This issue alone shines a spotlight on the reason why the SEC seeks to protect investors from such unregistered securities offerings. More protections in place could have prevented the accounting nightmare in the first place.

With ICOs now a thing of the past, crypto investors are a lot safer because of it, and the market much better off without them.