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SEC halts Telegram's $1.7B token offering (sec.gov)
323 points by jmsflknr on Oct 11, 2019 | hide | past | favorite | 201 comments

The SEC does not block such things because it thinks those are overpriced. The SEC does not care about the price. The SEC did not, and should not have blocked WeWork, to take an example.

What the SEC requires is a registration of the security with the form S-1/F-1. Nothing more, nothing less. If the paperwork is complete they will greenlight this offering.

I don't know why wouldn't they just register. Cut a very tiny percentage of the amount, pay someone to do the paperwork, you can go ahead. But do it with cards on the table, as the securities registration form requires (it's quite extensive and requires, for example, a clear statement of all risks involved in the offering).

My (admittedly limited) understanding is that registered securities can only be traded on specific exchanges with a special license. Most cryptocurrency exchanges don’t have this licensing, so becoming a properly registered security fundamentally locks you out of this exchange infrastructure.

Not sure if thats actually required, but for sure it makes it easier for SEC to approve a security if it has been already given greenlight by NASDAQ. I would believe the law doesnt dictate marketplaces but in practice the marketplaces enforce more regulation than the actual regulator.

It's the other way around - once SEC blesses something then NASDAQ or NYSE or any other exchange can list it.

NASDAQ is a private, for-profit corporation, not a regulator. I doubt they frequently reject listings, at least in the short term it's in their interest to have as many listings as possible.

In addition - NASDAQ, like all other exchanges, is subject to its own regulatory oversight from the SEC.

With all of that please remember that playing by the rules is not a pure loss. It opens you up to professional/institutional investors. These guys know and trust what the SEC says, far more so than what any random company says.

Also, remember why was the SEC created in the first place - it was after the 1929 crash (which was far more severe than the 2008 crash, see for yourself on a log() chart) and after the great depression that followed.

The time and cost to do an S-1 is massive and it can reveal embarrassing facts that lower the company's valuation, as in the case of WeWork.

Which is, of course, exactly what you want. These rules exist because charlatans bilked a lot of consumers out of a lot of money. The financial industry will do this consistently because the incentives are obvious. There has to be some external force slowing down the fraud.

>> These rules exist because charlatans bilked a lot of consumers out of a lot of money

The rules are made by the "deep state" to serve the establishment.

On a more serious note these rules/regulations/processes also deny access to capital to startups. It's not really that easy or cheap to go public on a stock exchange. People should do their due diligence before to invest in stocks anyway, right?

How exactly does one do due diligence without a substantial amount of disclosure to study?

It's the "embarrassing facts that lower the company's valuation" that matters for a billion dollar offering. The few hundred thousand dollars of legal costs aren't the issue here.

Tradable security: wash sale restriction

Tradable product or commodity: no wash sale restriction

Entire trading strategies change with securities designation, so thats one example above.

Entire free speech restrictions are created with securities designation

Entire accounting restrictions are created with securities designation

And the list goes on

There is no such thing as “just register bro!” It is a designation that carries a lot more baggage than just disclosing some internal company financial statements

Except these are very clearly securities? How could they possibly be a product or a commodity?

You're right, but some people seem to think cryptocurrency is magically exempt from securities laws because they really want them to be.

There are cryptocurrencies like Bitcoin who dont clearly have any issuer. On the other hand crypto tokens like telegrams ton has a clear issue. The latter is clearly a security, for the first you first have to find the issuer which cant be found.

Also I would classify ethereum as a security, because they created a token offering initially. After it was launched it was mined, but I understand majority was sold in the initial coin offering.

Satoshi is the issuer. Just because you can’t find the person who started a pyramid scheme doesn’t mean he doesn’t exist.

Just because he created software doesn't mean he issues BTC. Bitcoin by design doesn't grant him any control like that.

Pyramid scheme? Do you even know what does it mean? If Bitcoin is pyramid scheme, so are many others things like stocks, currencies etc.

Stock - you open part of a company

Currency - a state-backed value in which government salaries and bills are paid and in which you pay your taxes

BTC - a somewhat decentralised ledger where most coins are held by a very low number of people and where some of the early folks made massive amounts of money. Not backed out exchangeable by/for anything, with value purely coming from someone else being there to buy it. Great for dissidents, tax evaders and anything illegal - but not really any other case for its existence except among those with a radical distrust in government.

Stock - in theory yes, but look at how massively overpriced they are now. For example, do you think 123B capitalization of Netflix is appropriate to value of company itself? If there was no expectation of stock value going up indefinitely, would it really sell for current stock price?

Currency - you said "state-backed" - backed by what? Forcing it's use by demanding taxes and paying salaries/bills is not "backed".

BTC: "most coins are held by a very low number of people" - can you prove it? Consider that keys to many old account are probably lost.

"Not backed out exchangeable by/for anything" - neither are most/all currencies. Even commodities like gold sell by much higher price that is "backed" by usage of these in industry.

"value purely coming from someone else being there to buy it" - there is some value in being able to transmit/store value

"Great for dissidents, tax evaders and anything illegal" - I would actually say cryptocurrencies are awful for these applications: there are little places where you can pay with them and many will require verifications (and will report significant transfers). Bitcoin blockchain is public allowing tracking of transaction. On the other hand, cash? Accepted anywhere, non-trackable and people are already experienced in money laundering.

"but not really any other case for its existence except among those with a radical distrust in government" - distrust in government seems to be just healthy at the moment (for example, see civil forfeiture and Snowden).

I find it weird to even try to bring the ICO (which are the engine of fraud and should be anonymous, or otherwise you get to jail anyway) into legitimate space. Someone apparently lost their sense of limits. It's really difficult to comment on someone trying to make a fully legally compliant ICO and get surprised that it's difficult.

Cryptocurrencies exist to move money out of China by circumventing their currency controls (pay miners in RMB locally, get crypto, send it to Hong Kong, exchange into USD). ICOs are a byproduct of that process and exist merely for scam.

Again, i am not against scam. Scam is fine as long as you aren't getting caught - nearly everything in software in scam directly or indirectly. It's just trying to do scam in the open and getting surprising it's hard is what crosses my mental limits of acceptable chutzpah.

Scams and circumventing capital controls are two uses cases.

People want to use ICOs like they use Kickstarter: to fund a consumptive purchase. Digital assets have the capability of being consumptive. There isnt an obvious way to tell them apart, especially when there is a limited supply and exchange of money. People want there to be an easy way to distinguish business models and assets. So thats where experimenting with different legal theories helps.

Why downvotes? He is exactly right about crypto (>50% of volume?) being used to move money out of China.

Yes, i agree that they were not invented for that purpose. I think most likely they were invented to make covertly funding U.S. spies abroad, without any paper trail, completely circumventing banking system, easier. It's just what they are mainly used now.

Legal ICOs are STOs and not surprisingly they have a hard time getting off the ground.

> magically exempt from securities laws because they really want them to be.

Well when the law gets changed that's exactly why and how it gets changed

Last year, Wyoming has recategorized crypto assets into their own asset classes that is exempts them from state level securities law and others. Because it was obvious to the legislature and governor there that debating commodities, currency or securities status was ignorant.

This year, Montana representatives have also reached the same conclusion.

This year, Colorado's representatives have also reached the same conclusion.

US Congress has a bill in committee mirroring these. It isn't a priority for the House as you might imagine. Holistic US re-imagining of these assets isn't relevant until the Federal legislature reaches consensus.

A week ago Liechtenstein's legislature unanimously reached the same conclusion, which inherits limited consensus amongst all European Union/EEA/EFTA member states.

So yes, people seem to think cryptocurrency is magically exempt from securities laws except the securities regulators that do not mirror the will of the people and are being steered by their legislatures, as designed. Courts lack latitude to lean any other way as well, until the legislature changes the law, which is happening.

SEC applies Howey Test to determine if a given security is an investment contract (security) and as such must be registered if offered to public.

The test is quite simple: * It's an investment of money * There is an expectation of profits from the investment * The investment is in a common enterprise * Any profit comes from the efforts of the one offering the investment or a third party

Cryptocurrency trading in general could be either but ICOs are clearly in the security category.

I would be curious to see Wyoming etc. try to overturn Supreme Court's decision on SEC vs. Howey. If they are successful it will be the end of SEC and the public markets in the US as we know them.

Re: Liechtenstein. They don't have a stock exchange so they don't have anything to lose.

Nobody is trying to overturn the Howey and more important subsequent Federal court decisions.

The law in Congress will tell the SEC to stop wasting time on this and give a default status for digital asset issuers to exist in that isnt securities. Exactly as a handful of states have done.

Digital asset exchanges and issuers already exist in Liechtenstein. Kindly learn more about that.

Things that are actually securities in liechtenstein are passportable to other European countries that do have stock exchanges.

I think that was a very reductive and inaccurate comment on a multifaceted topic

I said: "These is no stock exchange in Liechtenstein. They have nothing to lose."

Your response: "Digital asset exchanges and issuers already exist in Liechtenstein."

Why do you conflate the two? Is it intentional or due to lack of understanding? L. is trying to make money on ICOs because it does not have anything to lose with regular financial markets.

> I think that was a very reductive and inaccurate comment on a multifaceted topic

And I think that was an attempt to intentionally complicate a simple topic.

Crypto can be used as an investment in a form of an ICOs and that should be registered.

It can also be used as a currency instrument for (mostly illegal) transactions. When used as such it does not need to be registered.

I guess its not clear: Liechtenstein doesn't need a stock exchange because securities - stocks in particular - issued in Liechtenstein are already tradable in countries that do have stock exchanges. People sometimes do this because some their own country might have a withholding tax on capital or other uncompetitive nuances.

You’re right in that they don't have one and have little to lose by creating digital securities and digital assets clarity.

Liechtenstein’s law isn't only about cashing in on ICOs. It covers digital securities as well, which Europe’s other securities exchanges are not equipped to handle.

There is only upside for them to provide a clear framework for digital securities and digital assets, making it easier for an issuer to choose and regulatory clarity for all participants

We speaking the same language yet?

> Liechtenstein’s law ... covers digital securities as well

L's population is around 35 thousand. It's like City Council of Menlo Park CA gaining a status of a sovereign state and then making venture capitalists from Sand Hill Road exempt from SEC rules. L is trying to make a buck by being more permissive because they have nothing to lose otherwise.

> We speaking the same language yet?

I suppose we do. English that is :)


Yeah, they’ve historically been pretty good at that, making quite a few quick bucks in financial services leading to one of the highest standards of living for a neighborhood acting as a country, and their bilateral treaties are crafty and well maneuvered

Its nice to see people applying themselves very well

Yes its like if Menlo Park was sovereign but also had economic unions negotiated with DC and the rest of North America, you would find that very convenient

I don't doubt for a second that money laundering and tax evasion services are very lucrative. Look at Cayman Islands. Their per capita GDP (PPP) is higher than in the States!

If you are in the business of offering furtive financial services it makes total sense to stay abreast with the times and add crypto to the portfolio. It's a great instrument for both money laundering and tax evasion.

and every other financial service

some of the largest public companies and hedge funds are incorporated in cayman islands. the obvious rebuttal would be that they too are vehicles for money laundering and tax evasion, but also everything else because the point is that you can't distinguish when a state doesn't use its resources demonizing transactions

I wasn't saying all crypto assets are necessarily securities.... just that these Telegram ones are.

How are these securities? There's no profit redistribution. Claiming these are securities is like claiming trading cards are a security.

Then there should be a component of the securities act that exempts some securities from some additional baggage of being a security

IRS blanket accounting rules around a security aren’t useful for these digital consumptive assets which bear no ownership of an enterprise

FINRA and Broker dealer related trading restrictions arent useful in digital consumptive assets that are also securities

If the SEC wants some level of consumer/investor related protection, sure some level of financial disclosure can still be mandated

But that holistic approach’t being pursued here and thats why its being avoided by the whole industry because a securities designation wrecks the entire consumptive aspect of these assets.

This isn’t a block on another telegram’s sale, but on their launch. Telegram filed an exemption for their original sale, and have been compliant with the SEC.


What this action threatens is the SAFT model. It’s not clear what steps TG needs to take to disassociate themselves from the launch such that TON is decentralized and no longer a security. Or if they need to file a reg-a or s-1 before launch.

[edit for clarity]

The title states flatly that they're halting the offering. Is that inaccurate? What's the distinction here?

If the title is misleading, the practice on HN is to replace it with a better (i.e. accurate and neutral) one, as described at https://news.ycombinator.com/newsguidelines.html.

This isn't a regulated security, so there's no 'official' name for what they're doing.

Basically, there was a private offering previously where large amounts were sold to selected parties. What is being blocked is the public 'offering' where these tokens can be publicly traded.

The SEC is saying that Telegram Group is clearly offering a security, and thus is subject to regulation. Indeed, what Telegram is doing is significantly different from 'classic' crypto issuance a la Bitcoin. There was no company or legal entity responsible for Bitcoin, let alone one that could control the network while profiting off of it. They have similar opportunities for the sort of financial malfeasance that the SEC is designed to mitigate.

Personally, I find it extremely difficult to argue with the SEC's position.

I strongly support cryptocurrencies, namely Bitcoin, but also recognize that these pre-mine coins are entirely different on many levels. They are hilariously vulnerable to abuse, only just rising beyond the level of an outright scam.

> This isn't a regulated security

All securities are regulated under American law. Some just qualify for specific exemptions from specific requirements.

When someone uses the term “unregulated security,” it’s a reliable red flag to go the other way.

I think it is usually people trying to say 'unregistered security', but using the wrong word.

If it's fungible and negotiable, it is a security, if it is a security, it is regulated. If you try to move something that is fungible and negotiable, it is offered, therefore an offering, therefore regulated.

The Howey Test[1] is the more precise definition of what a security is. For instance, physical metals are fungible and negotiable, but are not securities in themselves. Gold coin dealers are not regulated by the SEC if they sell you actual physical gold coins.

[1] https://consumer.findlaw.com/securities-law/what-is-the-howe...

>If it's fungible and negotiable, it is a security, if it is a security, it is regulated.

By this definition, Magic: the Gathering cards and beanie babies fall under SEC jurisdiction.

They are not fungible.

One mint condition card is exactly the same as any other. This is how marketplaces eork.

Not every security requires registration, though

Except that ethereum and eos basically get a pass by the SEC.

Offering is any time the token is issued, like on launch. The word is misleading since TG is not doing another sale. They actually complied with SEC during the sale. This is the launch which requires the tokens to be liquid for the network to function. My guess is that TG will file for a reg-a like blockstack.

> Offering is any time the token is issued, like on launch.

The Securities Act defines “offer” to include any attempt to dispose of a security for value.

In order for anyone - Telegram or Joe Schmoe Gram investor - to “offer” a security it needs to be either (1) registered or (2) exempt from registration. Since Telegram filed Form D and the SEC has brought charges alleging an unregistered offering it would seem the SEC does not agree that the ICO was exempt and so Telegram was not in compliance with federal securities laws.

But even if the ICO were by some miracle exempt, without a registration statement the securities can’t be offered for sale to the public - regardless of whether they were new issues directly from Telegram or existing securities being offered for sale in Telegram’s new marketplace by Telegram users.

Not being a crytocurrencer or securities analyst I am still confused by this distinction. What you're saying makes it sound like this isn't that big of a story—they just need to file some paperwork and then the thing will go ahead as planned. Is that right?

The legislation on the registration of securities clearly didn't anticipate cryptocurrencies so it's a bit of a legal gray area – the laws routinely discuss which states a broker is registered on, or has clients, or advertises the security, to name just a few examples of how crypto break expectations

So IMHO this is somewhat of a big story in the sense that these events continue to push the discussion forward

If you think filing for an IPO is just some paperwork, then yea :)

That doesn't help me understand what's going on here. Is this a big deal or just a formality?

It’s a big deal. A lot of projects followed a similar path so we will have to wait and see what objection the SEC had with telegrams specific offering. A reg-a/s-1 would likely take them a year if they started it today.

Ah ok. Thanks! In that case the title seems good.

Can you edit for more clarity? Lots of jargon still there.

> According to the SEC’s complaint, Telegram Group Inc. and its wholly-owned subsidiary TON Issuer Inc. began raising capital in January 2018 to finance the companies’ business, including the development of their own blockchain, the “Telegram Open Network” or “TON Blockchain,” as well as the mobile messaging application Telegram Messenger. Defendants sold approximately 2.9 billion digital tokens called “Grams” at discounted prices to 171 initial purchasers worldwide, including more than 1 billion Grams to 39 U.S. purchasers. Telegram promised to deliver the Grams to the initial purchasers upon the launch of its blockchain by no later than October 31, 2019, at which time the purchasers and Telegram will be able to sell billions of Grams into U.S. markets. The complaint alleges that defendants failed to register their offers and sales of Grams, which are securities, in violation of the registration provisions of the Securities Act of 1933.

The most interesting thing is that at one time I carefully read the prospectus and noticed that everything was perfectly done there correctly: tokens are issued in addition to certain securities that are issued strictly according to the current legislation, that is, the tokens themselves were NOT sold ... And It was not some former Russian lawyer who wrote the deal, but DLA Piper, one of the top 5 of approximately US legal concerns.

> tokens are issued in addition to certain securities

Could you please provide a pointer to registration paperwork of those securities? It must exist if they are "issued strictly according to the current legislation". Thanks.

This is great. Telegram's token offering was a gigantic scam. Does anyone really believe their tokens are worth $1.7B anymore?

Which is honestly a shame, because Telegram the messenger is freaking amazing. Probably the best instant messaging experience of my whole life. If only Pavel “Pashka” Durov decided to fund the company with something less scammy. Like a premium version with VPN and maybe some additional features like even bigger file uploads. I would be among the first clients.

It's the only IM app that does notifications right. I get a message and 'unread messages' notifications pop up on both my computers and my phone - the moment I click to focus the app on one of them, the notifications on the other computer and phone go away. With other apps it seems there's always a risk that a notification marker is just a leftover from before that they forgot to clear - that's never the case with Telegram.

Don't forget about drafts being synced between devices. I remember the first time I've noticed that: “Wait, didn't I write this on my phone? Why is this in my desktop client?”

That's actually the only feature that has a bug (the rest works flawlessly): when I connect my phone to the internet after I started writing a message, even if I have the chat open and I'm actively typing and internet just connects in the background, then it'll literally erase what I typed so far with no warning or anything. It'll see that the server has no draft or an empty draft or something, and it'll just get rid of my message so far and there is no way of getting it back.

Well, to be fair, there is also this other minor bug about encryption being off by default and only available on a few clients and not synchronizing between different encryption-supporting clients...

> Well, to be fair, there is also this other minor bug about encryption being off by default and only available on a few clients and not synchronizing between different encryption-supporting clients...

Here we go again.

Encryption is not off by default.

It is just not E2E encrypted, i.e. it works just like any bank, Gmail etc etc etc.

(except, based on what I've heard Telegram, unlike any mainstream bank, put the extra effort in to keep encryption keys not only on separate servers but in a different jurisdiction than your messages.)


Now if we could stop spreading misinformation we could discuss one thing that might be the real flaw in Telegrams model and which I would consider trying to move to a different messenger over - if they fixed it while delivering the same experience:

The one huge issue I have with Telegram is the funding model.

Whatsapp more or less nailed this early on:

- low, reasonable price that still made them plenty profit

- possibility to pay for others (kids, friends etc)

Give me the same offer as Whatsapp once gave me:

I pay them, they deliver my messages, provide quality clients on all platforms, doesn't snoop, doesn't spam etc, and I'll download the beta today.

Provide a legally binding agreement that makes their company worthless and publishes the code under Apache or another liberal[0] license somehow if they sell out or becomes sleazy and I'll be walking around pondering how to help them.

[0]: yep, I want it to be as simple as possible to make a good chunk of cash from transporting my messages securely and elegantly from my device to other peoples devices as well as the other way.

E(nd to end)ncryption is off by default, that's not an opinion. Gmail (afaik) doesn't have that at all, so saying it's off in Gmail by default is weird. It's not the same thing. (It's like saying a car's radio is off by default versus a bicycle's (non-existent) radio.)

Anyway, I guess that's just semantics. We both understand what is the case, whether you like calling it a default setting or "just not encrypted". I do fully agree that Telegram is shady because it's just a money sink, and that WhatsApp had a great profit model (pre-Facebook of course). I did the math once (though that was just messages, not media) and a euro a year (times a few hundred million users, back then) was plenty to support a chat system with only a few developers as employees. If Telegram would adopt the same profit model, that would be great.

Here is what you wrote:

> encryption being off by default and only available on a few clients and not synchronizing between different encryption-supporting clients

This more than implies that Telegram sends messages in plaintext.

Which isn't true.

In your reply now you prove that you are aware of this with this little sentence at the start:

> E(nd to end)ncryption is off by default, that's not an opinion.

E2E encryption is of course better than other forms of encryption but writing in a way that makes people think that something sends data as plaintext instead of encrypted is not acceptable at all IMO.


You are also misquoting me:

> Anyway, I guess that's just semantics. We both understand what is the case, whether you like calling it a default setting or "just not encrypted"

That's not what I call it.

I call it encrypted.

The secret chats option I call end-to-end encrypted.

Alright, you got me, I said encrypted instead of end to end encrypted. I did not think it was necessary to specify that level of detail, given that everything is encrypted-to-the-server these days. I see what you mean, there is indeed a difference, but it feels to me like you're trying to trap me on words for the sole reason of being to say that you're right and I'm wrong about something.

> I see what you mean, there is indeed a difference, but it feels to me like you're trying to trap me on words for no reason.

I'm honest, my contact details is in also in my profile like you have in yours, and I'm not trying to trap you on technicalities of the language, but I think we should be very precise about what we mean.

Either communication is cleartext or it is encrypted.

If it is encrypted it is either end-to-end encrypted or it is not.

A number of people keeps repeating this idea that Telegram is not encrypted and while you obviously know the difference we shouldn't continue confusing those who don't.

It would be a shame if someone went with something even less secure because I keep trash-talking Whatsapp and others keep trash-talking Telegram. (I fortunately don't hear many trash-talking Signal, but it doesn't have enough marketshare here to matter yet.)

Telegram has shipped deliberate backdoors in the past, they can’t possibly be trusted https://m.habr.com/en/post/206900/

I can't read Russian well enough to understand that ;-)

What I know however is that I can't recall anyone except you[0] claiming that, not even tptacek.

[0]: Thought I remembered your nick and had to look up: https://duckduckgo.com/?q=Ryanlol+Telegram+site%3Anews.ycomb...


Here you can see a couple of people with better CVs than mine discussing this.

But I agree, it’s incredible that I’m probably the only person in the world constantly bringing this up re:telegram

That is weird indeed, I never heard of this (and I'm relatively involved in Telegram-related thread / some tech groups on Telegram). It is fixed now, though. If it was ever a backdoor (which the thread does not conclusively say, just "backdoor looking" which sounds like either Telegram invented some unknown crypto that allows them to create a backdoor without anyone else having access, or an unfortunate mistake), it is no longer in there. As far as I know, this mtproto thing is weird but not broken. It is indeed something to be aware of though, I guess it's fair to bring it up, though I would not put it as black and white as "they backdoored it" when that is not actually certain. If you want to put it like that, you could also say that every vulnerability in the world could have been placed there intentionally. Which it could, but...

>It is fixed now, though

I think this is utterly irrelevant. Telegram deliberately shipped a backdoor, removing it after they got caught doesn't change anything at all.

>which the thread does not conclusively say, just "backdoor looking" which sounds like either Telegram invented some unknown crypto that allows them to create a backdoor without anyone else having access, or an unfortunate mistake

Look, I'm not going to speculate on what some individuals may or may not think about this in private. However, many people would not be comfortable making such direct accusations in public.

>though I would not put it as black and white as "they backdoored it" when that is not actually certain

This is as certain as it could ever be, I'll refer you to this comment that worded the explanation better than I would https://news.ycombinator.com/item?id=17621104

If it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck.

What do you think would be sufficient evidence to call this a backdoor?

>If you want to put it like that, you could also say that every vulnerability in the world could have been placed there intentionally

That assumes this was anything like every other vulnerability, which isn't true.

So I disagree with a lot of what you wrote, but the basic claim about the backdoor was something I am interested in so I clicked through and translated some of the Russian.

That totally looks like a backdoor.

How is this not common knowledge? Like, if the reason is indeed against a bad RNG, then why not xor the server's "random" number into the private key instead? Since the server does not know the value of that (as opposed to the shared key it establishes with Bob) and (if my limited understanding of math is sufficient) the private key is what is protected by the discrete logarithm problem, there should (afaict) be no possibility of backdooring the resulting shared secret. You would be mixing the server's number into a random number, which with xor gives an equally unpredictable result. Or, y'know, solve the badly seeded RNG by adding a seed to the RNG (such as by xor'ing an output of the current state with the number from the server).

It looks like I started using Telegram about four months after this was posted on Habr, and I think I was relatively early in using it. Maybe Telegram just wasn't very well-known yet and therefore nobody cared enough to make a big issue about it? "Backdooring" is also quite a hype word, I noticed somewhere last year that every third vulnerability was being called a backdoor, so perhaps tech media wasn't as quick to use that word back then? Then again, the Snowden leaks were ongoing, so it's not as if mainstream tech media wasn't talking about backdoors already in December 2013. I don't know, it's weird, this totally looks like it could have been designed in a million different ways and this is quite likely to be intentional.

Thanks for the link to a post which links to the technical details (albeit in Russian) complete with an example of how it could be exploited, that is indeed what I "think would be sufficient evidence to call this a backdoor".

Some features, like syncing and group chats can be made more convenient in Telegram because it is not e2e encrypted. For me that doesn't feel like a very good long term compromise.

Wire (wire.com) has E2E encryption and syncs chats and group chats across devices. It’s not the best experience, has slow clients and the company (Wire) is focused on paying clients, but it mostly works with few nagging annoyances. I wish Telegram would adopt something like that and make E2E encryption the standard for all chats.

The only other app I know of that is this stable is iMessage. Some of the time (literally) Slack gets it right, but other times their notifications are outright broken.

I hope this isn't too much of an aside, but this is part of why this current way of doing things isn't sustainable. Although telegram is end-to-end encrypted and isn't really comparable to IRC, IRC, while waning in popularity still works because it's a tool. If telegram can't get funding then what happens to its users?

Did you mean to say “isn’t” with respect to end-to-end encryption? Telegram chats are, by default, not end-to-end encrypted. Only if you choose to have a “secret chat” with one person it is end-to-end encrypted.

It’s only end to end encrypted if you opt-in. For a modern messaging solution, end to end encryption should be mandatory.

Telegram generally isn’t end-to-end encrypted, and when it is it’s backdoored https://m.habr.com/en/post/206900/

It’s an insecure messaging app though. Good UX, but there are stronger alternatives like wire/whatsapp/signal.

I use Wire and Signal. Honestly, there’s no point even comparing Signal with Telegram. The Signal client and the platform are abysmal — slow, unreliable (can’t say if the message will get delivered and when), generates device change notifications at random when nothing has changed, still can’t backup and restore chats on iOS, changing a device means jumping through hoops to join groups again, etc. In my usage, Signal is the antithesis of chat UX, though it has been improving very slowly over time.

Wire is a decent alternative since it also syncs chats across devices, but its clients are slow. Any chat with images will usually crawl when you scroll. The company also doesn’t care about free users (not that it should) and so it probably makes sense only for people who’re willing to pay.

WhatsApp shares metadata with Facebook. So it’s a complete non-starter.

Telegram has many features way beyond everything you mentioned. Telegram comes out ahead if you’re talking about non privacy related end user features. Even with WhatsApp, WhatsApp is limited to one mobile device. It’s desktop interface is weaker than Telegram’s and is a web interface. Needs syncing with mobile sometimes. Telegram has other nice things like the quick video 1 min memos.

Signal is so much more inferior for the end user outside of privacy there’s no reason to discuss it.

Insecure against what? These days, I'm more concerned about corporations data mining my private messages than government snooping, and I'm confident that Telegram accomplishes that. I'd use different messaging if I was concerned about state-level actors.

Much of picking a messaging system comes down to realistically assessing your threat model.

Before, a lot of token offerings could skate under the radar. That day is over, and the SEC is cracking down. Anyone offering anything close to a token would be well served talking to a lawyer experienced in securities law.

I've always been kind of confused as to how the SEC has jurisdiction on this. The Telegram tokens don't appear to be a stake in the company and rather seem to be similar to a PayPal account balance. Companies can effectively issue money via coupons or redeemable certificates. In the case of coupons there is some law about requiring them to have a marked cash value.

EDIT: Though it will prompt more downvotes -- explain them when downvoting, thanks.

You can Google the legal arguments, but suffice it to say that the legislation creating the SEC is old and vague, and anyone, including the SEC, who says that their characterization of tokens is absolutely correct is misleading you.

Also, the SEC is notorious for their intransigence even after multiple courts and even the Supreme Court have repeatedly rejected their legal interpretations. One example is their definition of insider trader--their definition of insider trading is far more expansive than courts will accept. When you take insider trading courses at a corporation, you're typically being taught the SEC definition, not the legal definition accepted by Federal courts.

Normally companies are risk adverse and aren't keen to piss off the SEC, so they play along. Nobody wants the SEC snooping around as there are invariably minor infractions to be found, especially at a large company. But sometimes, as with Telegram, companies will push back heavily when they want to aggressively pursue some profit opportunity. This doesn't mean these companies are willfully ignoring the law or aggressively pushing the envelope, as is often the case in other areas of regulatory law, e.g. Uber. Rather they're just not willing to placate the SEC. Their legal counsel might otherwise sincerely believe that the company's actions are well within the bounds of the actual law.

>You can Google the legal arguments, but suffice it to say that the legislation creating the SEC is old and vague, and anyone, including the SEC, who says that their characterization of tokens is absolutely correct is misleading you.

You've got that backwards. It's the crypto boosters who really, really, really want to avoid securities regulations who are misleading you with nonsensical, contorted non-arguments.

The SEC's characterization of tokens is absolutely correct, and the only people telling you otherwise are those who had hoped to make a buck off of avoiding regulatory scrutiny.

>This doesn't mean these companies are willfully ignoring the law or aggressively pushing the envelope

Yes, it does, without question. The companies doing this are trying to run exactly the sorts of scams and schemes that the laws were designed to protect against.

In this case, the SEC's reasoning looks very reasonable. Telegram is offering contracts that entitle buyers to Grams (digital coins) after the TON Network is developed. People who buy this contract are funding the development of the TON Network, in the hopes that they will obtain a cut of the created value, in the form of Grams.

These contracts are very similar to shares. They're an investment vehicle used to fund a company, which pays off if the company creates something of value. It's the SEC's job to regulate that sort of thing.

The legislation is vague enough, and the possible characterizations of tokens numerous enough, that there are invariably many reasonable interpretations. So it's not like the SEC is necessarily playing fast & loose either, except to the extent they want you to believe it's a slam-dunk. The SEC aggressively leverages that vagueness, but the reality is that vagueness usually benefits the defendant, especially with an increasingly conservative Supreme Court. OTOH, the approach used for SEC case law going back to 1934 is unique, so SEC-related decisions don't always track the direction of administrative law generally. Securities law is like its own quasi common law, a vestige of the tectonic shifts during the Great Depression and Roosevelt era, which makes it somewhat unique in the domain of Federal administrative and criminal law. Unless you really dig down, it's often the case that two sides have drastically different interpretations which are nonetheless both objectively reasonable on their face.

Though maybe it is a slam-dunk. I'm not a practicing lawyer, and certainly not an expert in securities law. I just have enough background knowledge and legal education to know that when it comes to SEC enforcements the legal landscape is often contentious, and that the SEC has a well-known M.O. It's just something to keep in mind as an outsider.

All SEC does is creating jobs for lawyers, fake sense of safety for amateur investors and a vulnerability in every business so it can be exploited once that becomes a profitable idea. Did you know everything is securities fraud?[1]

[1] https://www.bloomberg.com/opinion/articles/2019-06-26/everyt...]

In the SEC's defense, they're tiny and woefully underfunded. That's why they always come out swinging hard, and are so intransigent. They want interpretations that make it easy for them to penalize and convict. Big companies have enough legal resources, as well as enough pull in Washington, to wipe the floor with the SEC unless the law is crystal clear in the SEC's favor. The SEC is hardly the only regulatory agency that wants easier convictions, or is fearful of lobbyist pushback, but it's a perpetual issue with the SEC, and the situation is peculiarly and qualitatively unique.

If the SEC gives a small investor an inch, the big financial houses will extend that into a parsec. And those companies are constantly watching for those opportunities. So, yeah, the SEC isn't shy about picking a fight with the little guys because they only pick fights they think they can win, preferably outside court; the consequences of losing a fight are huge. This strategy isn't unique to the SEC, but it's uniquely consequential to their authority and effectiveness in general. It's an unfair situation all around, but at the end of the day responsibility falls on Congress.

In any event, my point was that if the situation seems confusing, it almost certainly is a confusing situation without any obvious answers.

That explains how they won those cases against small fry like Madoff and Martha Stewart.

Those were exceptionally (almost laughably) easy cases and, IMO, make my point. The hard ones were the myriad cases of ratings and other deceitfulness that led up to the 2008 financial crisis. Only a single top banker was successfully criminally prosecuted, and the list of settlements was infamously underwhelming: https://en.wikipedia.org/wiki/List_of_major_SEC_enforcement_...

For further reading see https://www.propublica.org/article/the-rise-of-corporate-imp... and https://www.theatlantic.com/magazine/archive/2015/09/how-wal...

The headline is clickbait. The article's actual claim is that scandals a torts are securities fraud.

From the SEC's filing:

> Grams are securities because the Initial Purchasers and subsequent investors expect to profit from Telegram’s work: the development of a TON “ecosystem,” integration with Messenger, and implementation of the new TON Blockchain. Grams are not a currency because, among other things, there are not any products or services that can be purchased with Grams. Rather, there is an expectation on the part of investors that they will profit if Telegram builds out the functionalities it has promised.

It continues:

> The definition of a “security” includes a wide range of investment vehicles, including “investment contracts.” Investment contracts are instruments through which an individual invests money in a common enterprise and reasonably expects profits or returns derived from the entrepreneurial or managerial efforts of others. In a variety of circumstances, courts have found that novel or unique investment vehicles constitute investment contracts, including interests in orange groves, animal breeding programs, railroads, airplanes, mobile phones, and enterprises existing only on the Internet. As the U.S. Supreme Court has noted, Congress defined “security” broadly to embody a “flexible rather than a static principle, one that is capable of adaptation to meet the countless and variable schemes devised by those who seek the use of the money of others on the promise of profits.”

Your first quote is interesting, as that definition fits quite well collectible items. As the brand grows the value of the collectible also grows, and the collectible is purchased to make profit (or can be purchased to make profit; maybe I do the reverse and by GRAM just for the fuzzy feeling it gives me). Yet we do not see such actions taken against companies that produce collectibles.

This is probably because when adding the second, you see there is a major theme of profit redistribution. In all of those cases profit is collected centrally and then redistributed. With a collectible or a token such as gram it is not -- the item may become more valuable, partially due to activities of the creator, but it is not a profit sharing scheme.

So... do Telegram's tokens grant you some definite share of their future profits? You're giving them money, but there is no legal recourse to claim a return from what I can see.

Collectables usually fail the "common enterprise" prong of the Howey test. Unless the operator is manipulating the market. Then, trouble. "In a fraudulent business scheme based upon the secret and dramatic manipulation of collectible stamp values, Escala and its former CEO, Manning, violated the antifraud and reporting provisions of the Exchange Act...."[1]

[1] https://www.sec.gov/litigation/complaints/2009/comp20965.pdf

I'm not a lawyer, but I think if you marketed a collectible as valuable to US residents because its price will rise due to your efforts to promote the associated brand, you would come under SEC jurisdiction by passing the Howey test.

> So... do Telegram's tokens grant you some definite share of their future profits?

Effectively, yes. People who buy these contracts are funding the development of the TON Network. The promised reward is in the form of digital coins on that yet-to-be-developed network. The contract only pays off if Telegram's development succeeds. It's effectively an investment in Telegram.

So it sounds like a kickstarter. Does the SEC regulate those? Realize the IRS has ruled cryptocurrency isn't any different than property.

It looks like they claim they are allowed to (https://www.sec.gov/smallbusiness/exemptofferings/regcrowdfu...) but at the same time in various businesses it is normal to take the money before a thing is built, that's just usually how it has to work.

Kickstarter doesn't give any money back to funders; they get a pre-defined good based on how much they give.

There is no reasonable expectation of profit for people funding via Kickstarter.

If someone would make a kickstarter that'd promise money returns, then yes, SEC would get involved.

Yeah, and Telegram doesn't promise any return as far as I can tell.

Telegram promises Grams (digital coins), to be delivered once the TON network is operational. Telegram even projects what the price of a Gram will be on the market.

This is a vehicle for investing in Telegram's business. If you buy this contract, you're giving Telegram money, which they promise to use to develop a new service. They promise to give you a cut of the value created by that new service. This is very much like a stock offering.

Collectibles are not exclusively purchased to be resold at a higher price ad infinitum. They are at least physical items.

>Collectibles are not exclusively purchased to be resold at a higher price ad infinitum.

Neither is crypto.

I use it to buy real things all the time.

Usually at a significant price discount, to boot!

In this case the SEC mentioned that there is nothing you can buy with Grams and there won't be for the near future. All you could do with Grams is trade them on exchanges.

Cryptocurrency. This is about crypto tokens.

A large number of people "invest" in collectibles only to resell them for a higher price. See: beany babies, trading card games, figurines, dolls. Just like those items tokens can be owned though their representation isn't much to look at. I'm not sure that is a useful distinction, unless you can explain further? E.g. why doesn't it apply to intellectual property?

I keep getting downvoted -- I'm not arguing that Telegram has a workable business plan, just that this isn't really something the SEC can regulate.

You can put collectibles on a shelf to impress likeminded friends. Or to feel happy. You can only trade securities and other similar assets. Also, generally if everyone bought figures to resell... I dont know how that can work... There is always an "unlucky fool" who buys from "scalpers" and keeps the item.

How about virtual collectibles in MMOs?

If purchased to resell, then yes it should be and already is mostly made illegal/breach of TOS.

People can buy things to enjoy, not just to resell.

> I've always been kind of confused as to how the SEC has jurisdiction on this

Because they ask for real money for merely handle you a digital certificate that, the main purpose of which is to wait it to shoot higher to sell for a profit?

Edit: Thanks for the downvote to validate this claim ;)

The issuing company needs to have already built the infrastructure that the token commoditizes, otherwise its a speculative investment, even if the token is just a voucher or grants access to a service.

You need to spend some time familiarizing yourself with HoweyCoin, in that case.


> Combining the two most growth-oriented segments of the digital economy – blockchain technology and travel, HoweyCoin is the newest and only coin offering that captures the magic of coin trading profits AND the excitement and guaranteed returns of the travel industry.

"Guaranteed returns of the travel industry." No way this turns out to be a scam!

“I’m all about HoweyCoins – this thing is going to pop at the top!”

Love it.

Best altcoin since mooncoin this is hot a f

> “We have repeatedly stated that issuers cannot avoid the federal securities laws just by labeling their product a cryptocurrency or a digital token,” Steven Peikin, Co-Director of the SEC’s Division of Enforcement. “Telegram seeks to obtain the benefits of a public offering without complying with the long-established disclosure responsibilities designed to protect the investing public.”

I agree.

Since there was never a public token sale (as it was all raised privately) they should have just done a debt/equity raise. What was the point in doing an ICO?

Though like all of these private token sales, it's a great way for crypto whales to multiply their imaginary wealth without having to exit to fiat and pay taxes.

To take advantage of the ICO hype. Telegram could never have raised $1.7B in different, more traditional medium.

I dunno, someone like Softbank would have happily thrown that their way.

It's unlikely that one Ponzi scheme will invest into another.

Without any equity and preferred shares? no.

The point is that the investors could dump their tokens onto clueless FOMOers on public exchanges. That doesn't work with traditional equity investment (see WeWork IPO).

They already raised $1.7B (and spent a good chunk of it, $280M by Jan 31 2019, probably $0.5B by now). Those who gave them money need a grater fool to buy the tokens from them. Otherwise the fun cannot continue. Someone will have to pay.

> without having to exit to fiat

Last time I checked one cannot buy yachts and private jets for crypto.

I'm really interested in how this plays out. It seems to me like the SEC's argument is that Grams aren't a currency because you cannot currently buy or sell goods with Grams. But the currency hasn't launched yet, and that's the whole point of the injunction I suppose: to stop the currency from launching before it becomes a currency. It also seems to me like this is an effort that's easily circumvented. Wouldn't it be trivial to offer something (such as some fancy badge on a Telegram account) in exchange for Grams, thus giving the currency value?

Are there any mechanics at play that could legitimately stop Telegram from launching the blockchain and distributing the tokens to users who aren't from the US?

It doesn't matter whether it is a "currency" or not.

> The test is whether the scheme involves an investment of money in a common enterprise with profits to come solely from the efforts of others. If that test be satisfied, it is immaterial whether the enterprise is speculative or non-speculative or whether there is a sale of property with or without intrinsic value. [0]

Thus if the ICO's are sold with the expectation that profiting from the purchase of those token depends entirely on Telegram completing work on their network and integrating that network with their app, then the Howey test seems to apply.

Telegram currently restricts the sale of the coin (via contracts) and heavily marketed the value coming from "200 millions of Telegram users will get a TON wallet making it the world’s most adopted cryptocurrency".

I don't really see how you could see this a not being a security under the Howey test.

[0] https://en.wikipedia.org/wiki/SEC_v._W._J._Howey_Co.

The question isn’t whether it is a currency or a security, it’s whether it is a commodity or a security. Under US law no cryptocurrencies are currencies. Some like Bitcoin and Ethereum are commodities, some like TON are securities, and most of them are unclear.

Does Telegram have assets in the USA to stop or otherwise punish them? I don't see how the SEC could otherwise do anything about it.

The USA, especially in the area of financial regulations has a very, very long reach.

I agree. Basically if you use US Dollars then US regulators consider you under their jurisdiction, because they can stop you from using US Dollars by limiting other entities (banks, payment processors) dealings with you.

Telegram as a corporation seems very determined to evade that reach, and appears to have the resources to pull it off.

Exactly this. Given how they have evaded Russia for a long time now, Murica must have something else in their assets to exert control over them.

Basically to evade American reach, you need to have support from Russia and/or China. If you don't have that support, you are going to have a very hard time.

And Russia and China are hardly the type of countries who are keen to support a secure messaging platform.

Which, FWIW is exactly why Telegram doesn’t even try to be a secure messaging platform.


Let's not pretend the United States government supports them either.


How about we not pretend that Russia, China, and the US are playing the same game either?

It seems to me that the US gov’t wouldn’t have a hard time getting Apple to remove Telegram from the App Store. That seems like a pretty awful scenario for them.

I wonder if my version from F-Droid would also be taken down (assuming they would bother sending a letter to F-Droid LLC).

Not really, Telegram works as a web app and also, not that many people in the world actually use iPhones (at least outside of the US. In the US though, more people use iPhone than Android it seems)

1+ billion iPhones are in use worldwide with more people having them in China than the US.

And the idea that people are going to simply switch from an iOS app to a web app is pretty laughable. Mobile web apps are by and large terrible experiences.

Everything I can find on it, seems that Apple and iOS has around 10-25% market share and units shipped[1][2][3][4] In China specifically, it seems to be around 20%[5]

And the idea of real people, having a real need for something in this very moment, is gonna care if they use a iOS app or a web app is pretty laughable too. Even with a worse user experience.

- 1) https://www.counterpointresearch.com/global-smartphone-share...

- 2) https://www.statista.com/statistics/271496/global-market-sha...

- 3) https://gs.statcounter.com/vendor-market-share/mobile

- 4) https://gs.statcounter.com/os-market-share/mobile/worldwide

- 5) https://gs.statcounter.com/os-market-share/mobile/china

There is more over at https://en.wikipedia.org/wiki/Usage_share_of_operating_syste... as well that shows around the same number above too.

You’re saying it’s laughable to think people would not switch to a web app over an iOS app if the iOS app is no longer available?

There’s no way the vast majority of users would switch. This would be the case for any sort of app. But especially for a chat app.

Also, iOS users generally spend more money and I presume in cases like their China market share, are also higher net worth users. Losing iOS users would be more than just losing their small percent of the overall iOS/Android market share.

"You’re saying it’s laughable to think people would not switch to a web app over an iOS app if the iOS app is no longer available?"

No, I'm saying if there is a application that solves a real-world problem (like keeping track of where to protest about the future of your home or communication with people are not reachable elsewhere), people don't care if you open Safari and click on a bookmark or if they open a native application. As long as it works, people will use it in the way they can access it with their current device.

"Losing iOS users would be more than just losing their small percent of the overall iOS/Android market share"

Not sure how much that would actually effect the global market share.

My two comments in this thread is just showing information taken from other sources, but they are getting downvoted. There is almost no opinion in these comments, so why the downvotes?

This is a lie. Telegram has not evaded Russia, has continuously lied about not having staff in .ru.

These aren’t honest people, on telegram.org they still continue to push lies about the “secure” and “encrypted” nature of telegram.

That's very true, I'm just wondering what buttons will they push to do that here given Telegram's background.

They instruct financial institutions world wide to cease processing transactions to/from telegram and freeze their accounts or lose access to the US banking system and risk having their assets frozen.

Pressure Apple and Google to remove the app from their stores?

At least on Android, Telegram is available via Fdroid: https://f-droid.org/en/packages/org.telegram.messenger/

Yep, but that's the "open source" Android app, where the irregular code dumps are often weeks or months behind the released Play Store version...

And it uses openstreetmap tiles instead of sharing location data with google, and a few more such modifications.

What percentage of Android users, or to be generous, Telegram users, are running Fdroid?

it's not a huge investment, and does not cost any money; market share really doesn't matter here when you can get in easily. you also can download the app on their website without installing their store app.

also keep in mind that telegram definitely can distribute their app on their website, like they do with desktop apps.

If you block Telegram from the Play store, suddenly most of them.

That would affect hundreds of millions of people who rely on their phone apps for chat. For others, Telegram would still work with its desktop clients as well as the browser based version at web.telegram.org.

That would only drive things more toward censorship-resistant blockchain-based app stores after Google and Apple's behavior with apps in Hong Kong.

> censorship-resistant blockchain-based app stores

Except that the word blockchain is entirely unnecessary here. How would IPFS not suffice? Or Bittorrent? Or Telegram itself. Unless no country on earth is willing to host X, X can host somewhere. This "X" can be Telegram itself or the app store that it is on. You make blockchain sound like magic pixie dust, but what the word means is something like git (see the Wikipedia page about it for a definition), not "magic pixie dust that makes something unblockable".

IPFS might suffice, it might not.

It also does happen to be Blockchain based . . .

Sounds like you're expressing cynicism more than an alternative pathway for achieving censorship-resistant blockchain-based app stores

No, it's not blockchain based.

How is IPFS blockchain based?

The statement says they're preventing Telegram from selling into US markets. They've already sold over one billion "grams" here, so presumably it would hurt Telegram's plans quite a bit to lose the US market entirely.

Maybe its a silly question but can Telegram just give back $1B to all american participants of the project and continue the process?

> can Telegram just give back $1B to all american participants of the project and continue the process?

That’s called disgorgement of proceeds. There are also usually fines and agreements not to break the rules again.

In this case, however, it would be tough to ensure no future buyer of these securities is American. (To say nothing of Telegram having raised U.S. dollars and so falling under U.S. jurisdiction.)


They already spent a good chunk of it: by Jan 31 2019 they spent $218M (that's a LOT! 200 employees burn no more than $50M a year, hosting maybe another $20M; the rest is probably just taken out by insiders). At that burn rate they likely have spent half a billion by now. Who is going to cover that?

Wow, why would anyone care (I am not even talking about exchanging their cash for that crap) about one messenger's virtual currency? I am personally looking forward for an opportunity to invest in Candy Crash Coins and Sim City Dollars and you wanna know why? Because BLOCKCHAIN!

There’s still a big market for companies or solutions that make cross border transactions cheap and quick. Conventional banks are far behind and quite expensive. Even companies like Transferwise, InstaRem, Xoom, etc., aren’t the best in all the markets they work in (and they aren’t available everywhere either). Government regulations on cross border transactions matter, but that alone cannot be the reason why current conventional solutions have been so bad for a long time.

Ha, the cost of an abstract "cross border transaction" is zero. The problems start when you want to cash in and out. At this stage welcome to the real world and appreciate the barriers Western Union/etc need to go through to comply with local AML/anti-terrorists/whatever laws. The "cryptocurrency" technology does not help in this case, that's the one of the crypto-shills agendas:

1. Cross border payments

2. Bank the unbanked 3rd world

3. Means to help for the hyperinflated currencies.

4. Store of value

All of them are completely delusional and only work for people who never had to make those payments, know 3rd world from the discovery channel and learn about hyperinflation on CNN.

Cross-border transactions are quick and cheap, if you value counterparty risk appropriately.

Although I don’t know much about the popularity of Telegram, WeChat has a pretty successful payment system, built into a messaging app. Not backed by a cryptocurrency, but it isn’t that far fetched for something like this to gain traction.

Kik is fighting the SEC because of their token Kin, is this a similar issue?

Yeah it’s a very similar situation. TLDR, they both started selling the token long before it actually existed, the token being totally controlled by one company, based on promises that they would build stuff later, to mass market US investors. All those are red flags for SEC action.

SEC didn't care when ethereum did exactly that-- created 72 million tokens out of thin air and sold 80% of them to the general public long before any system existed to make use of them.

That's true, or at least the SEC doesn't seem likely to go after Ethereum. It's hard to say for sure what exactly the difference is.

It seems like the SEC is intentionally not being clear about what they find acceptable and what they find unacceptable. I don't know whether this is because they are just slow about things, or whether they want to keep their options open because why not, or what.

It would be nice to have crisp, clear rules about how to create a new token that is considered a commodity in the US.

Or because there is potentially a conflict of interests?

It's not too hard to imagine that SEC staffers have an interest in some of the things they're not going after and don't have an interest in things that they are.

In particular, it sure seems to me that surprises in SEC enforcement seem oddly correlated with the offerings that I know were really liberal in handing out premined coins to 'advisors'.

But mah decentralization

Do token offering. Raise Millions. Deal with the SEC later.

If TON doesn't launch by October 31st they have to return the money and then Telegram will run out of money and go out of business. They only have 20 days to figure it out.

Telegram will not run out of money, Durov has enough money to support it for years.

Some one was saying they spent $200M+ of it already. If that’s true, he can’t afford that easily. He sold his VK stake for $300M 6 years ago.

Forbes is saying he’s worth $2.7B, but not saying how. Forbes has been wrong multiple times before on net worth. I’m guessing they are including his Telegram stake and the Telegram crypto value.

The big risk to governments isn't a generic cryptocurrency token. The big risk is a platform used by a huge base of people PUSHING them to be used in the real world. This is the trigger to cause mass adoption.

That is the real risk. That is why stopping them is an emergency action.

This is a big risk to the US government as well and it's really alarming to me how many american blockchain enthusiasts don't get that if they really did get their way, the dollar would tank and take every community with it.

Part of the strength of the dollar is the volume of trade that is done in it, including much of the world's energy. All that money moving around increases demand.

I've heard it said that in most revolutions, the middle class enlist the lower class to defeat the upper class for them, and then they insert themselves as the new upper class. This 'revolution' seems no different. A bunch of upwardly mobile people fantasizing about becoming feudal lords after they disrupt the entire system.

Things are not going so badly that chaos would be better.

I gotta say, technologists as a whole are reasonably nice people, but one of the reasons I have hobbies is that there are nicer people out there than us, and lots of them. We should not be in charge of the world. This is an area where we are wrong and I hope for everyone's sake that we fail.

If your 'decentralized' cryptographic currency can be brought down so easily, it deserves to fail.

Pre-mines like this are entirely orthogonal to Bitcoin and other legitimately decentralized networks; it's pointless to discuss them as though they were anything alike.

Crypto will fail or succeed based entirely upon how useful people find it. That's how it always has been, and always will be.

This is a security (according to the SEC) that went unregistered. Why can't they just register? With such a huge offering it's not so rich to just pay someone for filling the Form S-1/F-1.

It's not like the SEC hates Bitcoin/crypto on principle. Or Elon Musk (I'm referring to the 420 tweet). It just follows the securities law, a law that was established after the 1920s stock market crash and the Great Depression that ensued afterwards.

Again, it's not hard to follow the law. Fill the form, call it a day. Or don't fill the form and make sure you're only selling to accredited investors.

Also, filling form S-1 will help you getting professional investors on board. A whole lot of them trust the SEC data in Edgar.

Company scrip (Libra, this) could well be quite a bit worse than anything about fiat currency. The new boss is often worse than the old boss.

Yeah, that absolutely poses a threat to government-controlled fiat currency - but it poses another separate threat that shouldn't be understated: If a company like FB or Telegram becomes in control of a pseudo-currency, now individuals' right to use their currency are under the control of a for-profit corporation. We've seen recently just how bad that can get for people's rights - perhaps even worse than what governments already do. When the US government steals your shit you can at least sue them because there are laws on the books prohibiting it, but is the law going to protect you when Telegram invalidates your tokens? Maybe?

The SEC registration requirements are a blatant violation of the freedom to contract.

An individual should decide for themselves whether they will invest in a venture, not have that decision made for them by politicians and opinionated busybodies.

That's how we ended up with Great Depression. We don't want this to happen again.

The Great Depression had nothing to do with people being free to buy stocks. It was a classic bubble being burst, followed by counter-productive government measures to prevent prices/wages from deflating (which they needed to do as the money supply contracted):



SEC requirement is a side effect of the fact that contracts are enforceable in a court of law.

Every conceivable agreement, written and unwritten, is enforceable in a court of law. By your rationale, this justifies gatekeeping every form of human interaction.

No. Far from it. If you buy cocaine from Colombia your contract won't be enforceable in a court of law.

I mean everything not prohibited. Your argument now is tautological.

You are still wrong though :) Gambling contracts are legal in a lot of states. They are also generally not enforceable through courts. If my argument is tautological (I think not), yours is just factually wrong :)

Can you give an example of a legal gambling contract that is unenforceable in court, and provide a source?

>>If my argument is tautological (I think not), yours is just factually wrong :)

At least you're admitting you were making a tautological argument.

How do we realize this freedom in practice though?

Could you elaborate? You mean realize it by how we structure the law?

The answer to that is to repeal all statutes not consistent with Common Law and moving forward, depend solely on Common Law, which has long-established principles limiting state overreach and establishing genuine consent.

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