In May 2020 we could witness something, that most of us would not believe was even possible. Pavel Durov, a young billionaire, the majority owner (and founder) of a globally operating app Telegram, has announced that due to SEC’s doubts regarding his project under the name TON, he’s shutting it down. But let’s dive deeper into this story covered by Andy Samu for Disruption Banking.
In his post, Durov has wished luck to everyone fighting for decentralization, equality, and balance in the world. He also stressed, how this battle, is indeed an important (and righteous) one.
But what has led to that, and why Durov focuses so much on fighting the centralization? To find an answer to that, we’ll need to go back in time a bit. To 2016, to be precise.
Back then there was a small story involving Elizabeth Warren (who unsuccessfully ran against Joe Biden in the presidential primaries for the Democrats). But back then she was interviewing John Stumpf on behalf of the Senate Banking Committee. Back then she told him, that the best thing he could possibly do, was to resign. As we may imagine, he did not, but Warren’s words still appeared to be prophetic.
In February 2020, Wells Fargo was fined $3 billion by the American authorities. This was an effect of joint forces of the Justice Department and SEC (Securities and Exchange Commission) and to obtain that, the authorities had to work on the case for more than 4 years. And who was the previous CEO of the fined bank? John Stumpf, indeed. The company was accused after the scandal with fake accounts emerged.
Stumpf had to agree to a ban for a lifetime from working in the banking field and has paid a $17.5 million fine, as his role in the unlawful actions has been proven. We don’t know how much he actually made from it, but this sentence is nonetheless a very important step forward in SEC’s works, as it proves that no Wall Street elites could resist its powers.
Eventually, the social-media giants had to pay a whopping $100 million penalty, but have never confirmed nor denied the allegations.
Telegram’s vast development
And while SEC was busy with those high-profile cases, Telegram was gaining global popularity as a communicator, but not only that. It was launched in 2013, and by 2020 it has gained over 400 million users from all across the globe.
With such a foundation to build on, in 2017 Telegram has started to get involved in the sector of payments. First, they introduced “Bot payments”, which played a role of a middleman between two people transferring money. They described it as a “sheriff”, which makes sure everything goes smoothly and both sides are secure.
A year later they announced that they will be building their own blockchain under the name of TON (Telegram Open Network) and that $1.7 billion have been put in the project by private investors. Only two months later they released a piece of information about the Telegram Passport – an authorization method, allowing you to upload your documents once, and use them wherever you need to.
Along with that, the ICO (Initial Coin Offering) was going on there as well. SEC started investigating the company right after that. They already had some experience with token sales (cases of REcoin, Munchee, DRC World, or Bit Connect), so they are really cautious about their involvement in the Token and Crypto market. They accused Maksim Zaslavskiy (DRC World and REcoin) of fraudulent marketing, and he (duly) was sentenced to 18 months of prison for securities fraud conspiracies. But let’s not generalize, as not every ICO is actually done with an unlawful purpose.
The doubts concerning TON
Telegram has offered tokens called “Grams”. The SEC didn’t like the fact, that the company raised their capital, by selling 2.9 billion of those said “Grams” (worth $1.2 billion) in order to finance the business.
The Southern District of New York’s US District Court has agreed with the SEC’s doubts and decided that “Grams” could be considered as the securities. We have already described Telegram’s reaction in the first sentences – a complete withdrawal from the project.
This story, although caused a big disruption in Telegram’s finances, has proven to become a great marketing step. The company has, once again, shown the publicity, how it tries to be transparent, user-oriented, and lawful. It is not the first time that they’ve done so, as Durov has already stood up to the governments of Russia and China when they wanted access to his users’ data.
To read more about Telegram’s actions, we invite you to read the original and comprehensive piece published on the Disruption Banking page by Andy Samu. To find it, enter the following link: https://disruptionbanking.com/2020/07/09/sec-vs-telegram-the-battle-for-decentralization-balance-and-equality-in-the-world/