If you missed that, the Russian founder of the Telegram app – Pavel Durov, now aged 35, had announced that TON blockchain will no longer be working. In a detailed piece written by Andy Samu and published on the Disruption Banking website, we can learn more about the backstage of the whole situation. The author also provides us with an analysis of the wider aspect of the case.
In his official statement, Durov thanked every person striving for decentralization, balance, and equality in the world. He also assured that the battle he is fighting is indeed a righteous one. What had caused such words and actions to come from the young billionaire?
Background of the story of SEC and Telegram
The whole context roots deeply into previous years, as even in 2016 we could hear the far-famed words of Elizabeth Warren, the Joe Biden’s opponent in the primaries for the presidential run on behalf of the Democrat party. The renowned lawyer was interviewing John Stumpf in a Senate Banking Committee Hearing in 2016 and told him that he should resign. That did happen almost four years before Stumpf, the now former CEO of Wells Fargo agreed to a lifetime-lasting ban from working in banking, as well as a $17,5 million fine.
His previous workplace, Wells Fargo is one of the biggest American banks, and was punished by federal authorities with a $3 billion fine.
The Justice Department and the Securities and Exchange Commission were parts of this settlement dealing with the bank’s civil and criminal liabilities as the fake-accounts scandal emerged to the daylight. That, as Andy Samu states, is a huge step forward for the SEC, as it shows its ability to pursue and punish the Wall Street elite.
SEC has been putting high pressure on different entities and one of the recent examples that is definitely worth mentioning, is the Facebook case. The social media platform has been scanned and questioned for misleading disclosures concerning the company’s data processing. The 2020 investigation is yet another aftermath of Cambridge Analytica controversies – it has been proven, that from 2015 the company had used Facebook users data to prepare targeted political campaigns. Only three years later had Facebook changed arrangements despite having been aware of Cambridge Analytica’s actions.
Facebook paid a penalty of $100 million, but neither confirmed, nor denied SEC’s allegations. When the SEC had big fish to catch, with the mentioned cases publicized by the media, Telegram was building its position on the market, not only by launching their application.
The rise of Telegram
Telegram was first launched in 2013 and as for April 2020 it has gathered over 400 million users from every corner of the planet. Back in 2017 the company started to be involved in the payments sector as it introduced a feature called Bot payments. Those were their first steps in the financial field, but they soon gained momentum.
In May 2018 the company started to build its blockchain platform called Telegram Open Network (TON). Private investors had supported authors with $1.7 billion. As Telegram officially informed, the first stage called Telegram Passport was unified authorization method for services that require personal identification. Upload your documents once, then instantly share your data with services that require real-world ID (finance, ICOs, etc.).
As the SEC did not want to waste time, they started investigating the case of Telegram in 2018. They already had experience in taking actions against token sellers, so their moves in the Telegram case were really watchful. In previous investigations they proved mischievous intentions (in the Disruption Banking piece the author gives an example of Maksim Zaslavskiy sentenced for 18 months of prison) behind Initial Coin Offering. As it appeared later, the only Telegram’s purpose was the good of society.
Telegrams tokens were called Grams and as SEC alleged, the company has sold 2.9 billion of Grams in order to support its businesses. The Grams sold were worth $1.2 billion in total. The SEC received support of the US District Court for the Southern District of New York, which announced that Grams could be securities. The Telegram’s reaction was unprecedented, as they announced discontinuation of the blockchain project and complete cease of TON’s development.
SEC and Telegram after ceasing the TON project
On 25th June Pavel Durov addressed the case again, now stating that the company was not able to launch its product by the deadline due to the Court’s decision, thus they had to return the remaining funds to purchasers. He also expressed his hopes for future innovations in the blockchain field to be treated more favorably by the regulators in the US.
Only a day after his words, the SEC had replied, New and innovative businesses are welcome to participate in our capital markets, but they cannot do so in violation of the registration requirements of the federal securities laws,†said Kristina Littman, SEC’s chief of Enforcement Division’s Cyber Unit. She also put an emphasis on the fact that the Telegram was obliged to return funds to investors, give notice to future digital offerings, and comply with significant penalty.
Telegram has once again proven themselves as a reliable and safety-oriented company not only by complying to the SEC’s ordinances, but also by protecting its users. As Andy Samu recalls in his article, Roskomnadzor (Russian telecommunication supervisor) blocked at least 16 million IP addresses in early 2018 after obtaining a court order to ban Telegram.
Russians also tried to attack American companies – Google and Amazon’s cloud platforms that were used by Telegram. As some sources say, including famous whistleblower Edward Snowden, that was a punishment after Telegram refused to grant Russian authorities backdoor access to private communications.
What happened to Telegram?
As Telegram’s Pavel Durov announced, the applications Russian user base actually doubled since 2020. It appears that the society appreciated the company’s transparent management of private data. In May 2020, out of 400 million monthly active users of Telegram, at least 30 million were from Russia. To put it simply, the ban didn’t work. And in June 2020 Roskomnadzor announced that Telegram is no longer blocked in Russia, said Durov.
The Telegram hit the headlines again in June 2019 after it has been attacked from China. Although the network of Chinese computers disrupted Telegram’s service, it has not penetrated its servers. Pavel Durov admitted that this kind of actions is something the Telegram had to deal before. The reason of mentioned bombarding of Telegram was its tenacity in dealing with the Chinese government. Ever since Hong Kong protests started, Telegram has been used by the protestors as a safe communicator.
The Chinese government tried to identify people in the crowds, by controlling what they text each other, but Telegram responded by making things even harder for the officials. After the attack, Telegram introduced a new feature, which allows members of group chats to hide their phone numbers and personal information – that way, even if any leak happens, a maximum safety is guaranteed.
In his Disruption Banking piece, Andy Samu conducts an even deeper analysis of the situation as he delves even more into the recent history of Telegram. We invite you to read his work in order to find out more about SEC and Telegram story. You can find it by entering the following link: https://disruptionbanking.com/2020/07/09/sec-vs-telegram-the-battle-for-decentralization-balance-and-equality-in-the-world/
