Telegram’s TON ICO: A Legal Look at the Most Hyped ICO of 2018

Telegram's upcoming ICO is slated to be the biggest ever and in this post we take a look at the legal matters around the $850M pre-sale.

The ICO held by Telegram, one of the world’s most popular messenger apps, has been talked about for weeks. According to Telegram’s Notice of Exempt Offering of Securities, the company has raised $850 million US dollars from 81 accredited investors in exchange of issued securities from January 29th to February 13th.

The TON Whitepaper states that 84 percent of blockchain-based projects have an active Telegram community, more than all other chat applications combined. Forbes and other media outlets have called Telegram the “cryptocurrency world’s preferred messaging app” and “as ubiquitous to the cryptocurrency world as Snapchat is to a teenager.”

In their recent post,, an online magazine devoted to covering the ongoing regulatory attempts to oversee and control the newest technologies, reviews the campaign from the legal perspective. Below is a brief exposition of the blog post.

According to the Notice of Exempt Offering of Securities, the post states, Telegram Group Inc. and TON Issuer Inc. have sold Purchase Agreements for Cryptocurrency in exchange for $850 million.

Unfortunately, other details of the sale are not available to the public at the moment, however, pursuant to the TON Whitepaper, the token sale will likely use a SAFT to be converted 1:1 to native TON tokens (Grams) after the deployment of the TON Blockchain in Q4 2018.

In case Purchase Agreements for Cryptocurrency were sold as SAFT (The Simple Agreements of Future Tokens), Pavel Durov has indeed held an ICO. It means he opted for passing rights to receive and thus own digital tokens in the future instead of passing such rights now, the team suggests.

In July 2017, the United States Securities and Exchange Commission reported that some digital tokens can be qualified as securities. However, the post goes on to state that the U.S. Securities Legislative contains some exemptions, so an issuer can sell securities without their registration with SEC. Thus, if one does not intend to sell securities to the public but intends to sell them to accredited investors only, he or she will be able to use Rule 506(c) of Regulation D to exempt themselves from general rule of the securities registration with SEC.

According to the SEC, purchasers in a Rule 506(c) offering receive “restricted securities.”, i.e. “previously-issued securities held by security holders that are not freely tradable.” Pursuant to SEC, after such a transaction, the security holders can only resell the securities into the market by using an effective registration statement under the Securities Act or a valid exemption from registration for the resale, such as Rule 144.

Thus, digital tokens sold as securities even under Rule 506(c) of Regulation D might not be freely tradable.

The SAFT model, the team suggests, looks more appealing than an offering of securities tokens as an issuer sells just Simple Agreement for Future Tokens which grants the right to receive and thus own digital tokens in the future, most likely when the product is officially launched. Still, the post indicates that SAFT is not freely tradable, while future digital tokens most likely are. Moreover, those tokens usually are utility tokens but not securities tokens.

The post goes on to suggest that it could be the reason why Telegram decided to sell Purchase Agreements for cryptocurrency to accredited investors instead of selling digital tokens to the public over a simple token sale.

Another explanation could involve minimizing legal risks of being dragged into legal proceedings, both by the regulators or token holders. Pavel Durov could also have chosen this direction for the purposes of future liquidity on cryptocurrency exchanges and token price appreciation. After all, the number of those who want to purchase Telegram digital tokens might be huge only due to a very limited initial sale.


Telegram’s ICO is another good case from both, legal and marketing perspectives. The number of blockchain projects which are going to raise funds over ICO and prefer private sales over public ones; and selling SAFT rather than digital tokens to accredited investors only in compliance with US securities laws will most likely increase from here on.