Like much of the world, we have been following, and reporting on, the situation developing around Telegram vs. SEC, for months now.
After a long battle, Telegram CEO, Pavel Durov, has announced that the company is giving up their battle against the SEC, and closing the doors on TON.
“I am writing this post to officially announce that Telegram’s active involvement with TON is over.”
Disdain for the U.S.
If one thing was made clear from the message, released by Pavel Durov, it is a certain level of disdain towards the regulators within the United States. From an outside perspective, this is an understandable mindset.
When referencing a U.S. court decision to ban the global sale of GRAM tokens (not just within U.S. borders), Pavel Durov had the following to say.
“This court decision implies that other countries don’t have the sovereignty to decide what is good and what is bad for their own citizens.”
“…we, the people outside the US, can vote for our presidents and elect our parliaments, but we are still dependent on the United States when it comes to finance and technology (luckily not coffee). The US can use its control over the dollar and the global financial system to shut down any bank or bank account in the world. It can use its control over Apple and Google to remove apps from the App Store and Google Play. So yes, it is true that other countries do not have full sovereignty over what to allow on their territory. Unfortunately, we – the 96% of the world’s population living elsewhere – are dependent on decision makers elected by the 4% living in the US.”
Perhaps the best way to understand the timeline, surrounding events throughout this saga, is to look back at our past articles.
Arguably, the inciting incident, which ramped up tensions between Telegram and the SEC, dates back to September of 2019. At this time, an email had leaked, which indicated the potential for Telegram to distribute GRAM tokens earlier than originally planned.
While rumblings of regulatory issues occurred prior to October 12th of 2019, is was on this date that the SEC filed for a restraining order against Telegram, and its subsidiary, TON. At the time, representatives from the SEC stated, “Our emergency action today is intended to prevent Telegram from flooding the U.S. markets with digital tokens that we allege were unlawfully sold…”.
From this point on, a fierce battle ensued, with the SEC maintaining the stance that GRAM tokens were, indeed, securities. Along the way, Telegram did experience some small victories. In January of 2020, they successfully convinced the presiding judge to deny the SEC access to Telegram's full banking records. These efforts by the SEC prompted strong words from Telegram, likening SEC efforts to a ‘fishing expedition’
At this point, it wasn’t just news outlets that were taking notice of the situation. February of 2020 marked the first time that an outside regulatory body was probed for their input on the situation. In this instance, the courts reached out to the CFTC, asking how they would classify GRAM tokens per their standard practice. While not solicited by the courts, outside groups, such as the Blockchain Association, also took the time to weigh in on the situation.
By the time March of 2020 rolled around, investors were weary of the proceedings. Between months of wondering what would happen to the project, and the growing COVID-19 pandemic, many had accepted the notion of a refund.
When news of interest in a payout broke, it was only weeks later that Telegram announced the first structuring of a potential investor refund program. While this was welcome news for many, it was only a short time later that U.S. investors were made ineligible for this possibility.
That brings us to the present, ending a months long battle which saw both sides win small victories; A process that saw token distribution delayed multiple times, outside influences, and refund programs derailed for many.
Regardless of whether you side with the SEC or Telegram, in this case, it served as a teaching tool for any company contemplating a similar path.
Perhaps, Telegram and the TON project were made examples of in the crypto-sector justly so – or maybe the SEC the U.S. Court did, indeed, overstep their bounds. Perceptions fluctuate, however, this time around, Telegram was perceived to have been in the wrong.
For those interested in learning more about what distinguishes a security token from a utility token, make sure to peruse a past contribution to our ‘Thought Leaders’ series by Constantin Kogan of BitBull Capital.
Telegram is a popular messaging platform, available on PC, iOS, and Android. The TON project, was an endeavour built upon Telegram, which would facilitate the value transfer through the use of GRAM tokens. While this project is now shut down, Telegram continues to operate, as popular as ever.
CEO, Pavel Durov, currently oversees company operations.