U.S. SEC intervenes forcefully, Telegram: Cannot guarantee the realization of any applications

Telegram, the messaging app with over 200 million users that was set to launch the blockchain Telegram Open Network (TON), appears to have reneged on its initial promises to all investors as it faces scrutiny from the SEC.

Telegram was co-founded by Russian entrepreneur Pavel Durov and his brother Nikolai (a renowned computer scientist). In 2018, TON did not conduct an ICO due to regulatory concerns, but still raised nearly $1.7 billion in two private funding rounds, second only to EOS' $4 billion in history.

Telegram Alters Its Decentralization Vision

Telegram has been in a face-off with the U.S. Securities and Exchange Commission (SEC) since the end of last year. However, a statement released on January 6 on its official website indicated that the initial vision described in the whitepaper may not be realized. The team stated:

Telegram has not committed to, nor has any obligation to establish the TON Foundation or a similar entity in the future. When the TON Blockchain is launched, the TON Wallet application is expected to be operated independently and not integrated with the current messaging software service.

Perhaps due to the SEC's active scrutiny, the team explicitly stated at the end of the document:

Subject to compliance with regulatory requirements and the limits set by government agencies, Telegram might integrate the TON Wallet application with the Telegram Messenger service in the future.

Furthermore, the team repeatedly mentioned the high risks associated with cryptocurrencies, emphasizing that Telegram cannot guarantee adoption or the realization of any applications. Telegram stated:

We are creating a decentralized platform, and once launched, Telegram is not obligated to maintain the platform and may never create any applications for it.

Grams tokens are not investment products, and their value may decrease over time, potentially losing all their value.

Emergency Action by the Securities and Exchange Commission

Telegram's high-profile response seems to be in response to an emergency action by the SEC. Last year, the SEC issued a press release describing Telegram as an illegal security. The SEC stated:

Our action is intended to prevent Telegram from flooding the U.S. markets with illegally sold cryptocurrencies. The team did not provide investors with information about the business operations, financial condition, risk factors, and public disclosures required by securities laws regarding Grams and Telegram.

According to a report, if the SEC successfully sues, Telegram's founders Pavel and Nikolai Durov may be prohibited from selling securities in the U.S. and may have to return all funds and interests to investors.

Previously, it was reported that in early 2018, Telegram raised $1.7 billion in two funding rounds, $850 million each. The price of one Grams token was $0.37 and $1.33, with over $400 million coming from U.S. investors.

As of now, Telegram has postponed the issuance of Grams tokens to April 30 this year and faces increasingly strict regulatory scrutiny by the SEC before its release. Whether its founders Pavel and Durov can realize the vision described in the whitepaper remains uncertain.

Further Reading

• Competing with Facebook! Telegram, the encrypted messaging app, launches the TON blockchain platform
• Telegram's GRAM token is about to go live, expected to surpass XLM in market value and reach the top ten in market capitalization

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