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Telegram Wins Court Battle But Abandons TON Blockchain

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Telegram - TON Blockchain

The hugely popular messaging app, Telegram enjoyed a short-lived win in court against the Securities and Exchange Commission (SEC) this week. A federal judge denied the SEC's request for Telegram to hand over all bank statements before January 8th regarding its TON blockchain project. Unfortunately, the mounting legal ramifications coupled with the more aggressive stance taken by the SEC following the start of the trial has made company executives reconsider their TON strategy altogether.

Telegram has been enthralled in a case with the SEC over the development of its TON blockchain and Gram cryptocurrency for months. In October, the SEC sued Telegram. According to SEC documentation, the firm alleges that Telegram violated numerous federal securities laws during its record-breaking 2017 $1.7 billion initial token offering (ICO).

Defending the TON Blockchain

For its part, Telegram put up a hefty defense. The company claimed that Grams are utility tokens. Therefore, they fall outside SEC jurisdiction. In turn, the SEC saw these actions as a slap in the face. Consequently, the group decided to expand its investigation. Now the SEC doesn't just want to stop the sales of Gram tokens, the group seeks to call into question the validity of the company's 2017 ICO.

The SEC claims that Telegram engaged in fraudulent activities during its fundraising campaign. This pivot towards a more aggressive prosecution of the firm comes after SEC officials accused Telegram of stalling and making excuses regarding the group's request for investor information. Ironically, its exactly this request which has put Telegram in a bit of a quagmire.

Small Win for the TON Blockchain

Federal Judge, Kevin Castel of the Southern District of New York is the official preceding over the case. He handed Telegram a small victory in court this week after postponing the SEC's demand for investor information. Telegram denied the ability to provide this info by the requested January 8th deadline because it would violate EU consumer protection laws. Basically, EU privacy requirements mandate that the firm remove all personal information from EU citizens files before handing them over to a foreign government.

Judge Castel did, however, let Telegram officials know that the denial was really more of just a postponement. He stated that in the “not-too-distant future” the firm would need to provide the requested bank statements to the SEC. The added time frame gives Telegram a chance to produce such records without violating any foreign data privacy laws.

Rethinking the TON Blockchain Concept

Following the increased SEC pressure, Telegram officials decided it was best to abandon some of the most critical parts of its TON blockchain strategy. In a recent blog post, the firm shed some light on the monumental changes executives decided on. For one, Telegram will no longer integrate its Gram cryptocurrency wallet into the Telegram Messenger. Basically, the wallet will be available solely on a stand-alone basis.

TON Blockchain Post via Telegram Twitter

TON Blockchain Post via Telegram Twitter

The post was equally damming for the TON blockchain project. Company officials stated that they have no plans to maintain or develop future applications for the TON blockchain. In fact, the company stated that it hopes that third-party developers will step in to keep the blockchain functioning via some newly founded foundation.

Massive Blow to TON Blockchain Investors

The decision to not integrate the TON ecosystem into the Telegram messenger is a massive blow to investors. Telegram has over 200 million monthly active users. The direct integration of TON into the platform would have provided the system with a huge advantage over the competition. Starting the concept with a giant captive market and giving users instant and seamless access to Gram tokens was the main driving force behind most investor's decision to become a part of the TON blockchain.

To drive the post home, Telegram made a public statement, which is more of a legal disclaimer. In the disclaimer, the company stated some surprising facts. For one, Telegram claims that it never “made any promises or commitments to develop any applications or features for the TON Blockchain.” ¬†This post left TON investors wondering what is to happen to their capital now that the project's main draws are no longer the reality.

Telegram – TON Caught in the Cross Hairs

Considering the sheer size of Telegram's 2017 ICO, it's not a huge surprise to see that the SEC decided to put some pressure on the firm. Unfortunately, the SEC has now left TON investors holding the bag, as the firm has all but abandoned their crypto dreams.

Is it Hoax?

There are some analysts that believe that the new tactics displayed from Telegram are actually part of a larger strategy. They see the maneuvers as a way to ease the platform into existence. By producing the TON blockchain and wallet as a separate entity, Telegram can avoid much of the fear and disdain regulators and lawmakers have shown thus far.

Much of this negative press can be attributed to the spillover from Facebook's Libra project. Government officials are not keen on huge social media platforms entering the crypto sector. Already, lawmakers from both sides of the aisle have put forth stifling regulatory bills to slow the adoption of cryptocurrencies by these tech behemoths. The question now remains, will these regulations be enough to halt these projects? In the case of the TON blockchain, it appears that they were.

TON – A Dream Lost

It's sad to see a concept as advantageous as the TON blockchain dismantled slowly. The sheer size of Telegram's network would have significantly boosted cryptocurrency adoption globally. Analysts pointed towards massive social media networks as one of the fastest ways to integrate cryptocurrency use in an effective manner. Unfortunately, its exactly this large scale adoption that has lawmakers and regulators on edge.

No Grams for You

Despite strong support from investors, and a record-breaking ICO, it now looks as if the entire TON blockchain project has come into question. Hopefully, Telegram and the SEC find a mutual understanding. If so, it could allow for the continuation of the development of this unique and game-changing blockchain. For now, the cryptocommunity awaits to see both the SEC's and Telegram's final response.

David Hamilton is a full-time journalist and a long-time bitcoinist. He specializes in writing articles on the blockchain. His articles have been published in multiple bitcoin publications including