By Gertrude Chavez-Dreyfuss
NEW YORK (Reuters) - Messaging app Telegram has shelved its blockchain project called Telegram Open Network (TON) after a protracted legal battle with U.S. legal authorities, founder Pavel Durov said in his blog posted on his channel on Tuesday.
The blockchain project and cryptocurrency raised about $1.7 billion from investors in 2018, at the height of the initial coin offering frenzy.
Telegram had been working for more than two years on a blockchain platform called TON and a cryptocurrency to be named Gram, much like bitcoin and ethereum, but with loftier goals, Telegram said.
In October last year, the U.S. SEC sued to shut it down because Grams, the tokens to be distributed to investors were unregistered securities.
In March, a U.S. judge affirmed the SEC decision and ruled that the Gram token couldn't be distributed not only in the United States, but also globally.
"Unfortunately, a U.S. court stopped TON from happening. How? Imagine that several people put their money together to build a gold mine – and to later split the gold that comes out of it," said Durov.
"Then a judge comes and tells the mine builders: 'Many people invested in the gold mine because they were looking for profits. And they didn't want that gold for themselves, they wanted to sell it to other people. Because of this, you are not allowed to give them the gold.'"
Durov pointed out that people outside the United States are still dependent on the world's largest economy when it comes to finance and technology.
"Unfortunately, we – the 96% of the world's population living elsewhere – are dependent on decision makers elected by the 4% living in the U.S.," he said.
The Telegram blockchain's developers – two brothers who founded the widely-used encrypted messaging app Telegram – raised funds in two private offerings to institutional investors in 2018. In return, the developers promised that investors would receive 2.9 billion 'Grams,' a new digital currency that was slated to begin to circulate when the TON blockchain launched.
The developers spent $405 million, which they said would be faster and more efficient than the bitcoin and ethereum platforms, according to court documents.
"It is unfortunate that Telegram was forced to give up on TON," said TON Labs, tasked with creating infrastructure for the Telegram's TON network, in an emailed statement to Reuters.
TON Labs added it is now even "more convinced that genuine decentralization is the only way to fast-track innovation."