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What Was TON And Why It Is Over (telegra.ph)
287 points by amaccuish 13 days ago | hide | past | web | favorite | 162 comments





His analogy is pretty poor IMO. A more realistic analogy is: imagine if a group of people got together and bought a plot of land to mine gold. Then imagine these people told all of their friends that they had a gold mine and were willing to split the output of the gold mine with all of their friends for just $10k/piece.

Now imagine the government said: hey, you don't even know if there's gold on that land, but you're promising your investors that there is. And not only are they telling us we can't sell part of our non-existent gold to our friends, we can't sell it to people ANYWHERE.

Sound completely unfair? Government overstep? We aren't allowed to sell people something that doesn't exist?


You're describing "prospecting", or (less charitably) "wildcatting", which is a legitimate business.

> We aren't allowed to sell people something that doesn't exist?

You're allowed to sell rights to things that might exist in the future.

If someone puts a ton of money into something stupid that's pretty clearly not going to pay off proportional to the expense, that's on them.

> you're promising your investors [a return]

This is somewhat different from your first paragraph. Overselling your confidence in the financial outcome of a bet is (usually obvious) fraud, but that's a different problem from selling a stake in a risky endeavor.

Not defending Telegram's stupid shitcoin, but trying to get the Government to stop this (whatever your probably loosely-held idea of "this" is) is probably not a good idea.


And now we have come full circle. The government does indeed permit wildcatting or prospecting, but it requires that all investors are accredited. The same is true for TON and other bitcoins -- the govt is not trying to forbid them, but merely require the normal level of investor vetting that is in place across the rest of the economy.

Requiring accreditation has always seemed like a well intentioned policy that mostly locks in inequality, so I guess I'm opposed to the government's ruling whichever way you slice it here.

There’s a piece by Matt Levine of Bloomberg’s “Money Stuff” on this. You might find it interesting: https://www.bloomberg.com/opinion/articles/2018-09-24/earnin...

“Other bitcoins” doesn’t parse - did you mean “other shitcoins”? Bitcoin is a specific product, and shitcoins are a disjoint category.

The government only requires people to be accredited for "ICO"s, not currency/utility "coins" like Bitcoin or Ethereum.

As an aside, I believe the “accredited investor” category is mostly a subsidy of rich people. Exclude peasants from investing in the good high-return stuff and you can demand higher capital premiums.


The legislature is in place after the wild decades portrayed in the movie "The Wolf of Wall Street". In an indiscriminate freewheeling environment very few peasants got the good high-return stuff, but many had their savings wiped out by slick salesmen with promises of quick riches.

> the wild decades portrayed in the movie "The Wolf of Wall Street"

Basing your legal theory on fiction movies is not a great move.


The parent referenced a time period. They did not base a legal theory on a work of fiction.

Kleenex is a specific product too, but is often used as a generic term. “Bitcoin” might not be commonly used that way but it parses just fine to me.

Buggy parser; you wouldn't call paper towels or wet wipes Kleenex, right? Because that's what you're insinuating by calling other cryptocurrencies 'Bitcoin'.

If someone told me to pass the Kleenex where only paper towels are, my hypothetical self with hypothetical knowledge about the intricacies of paper products, I would probably roll my eyes and internally go “those aren’t Kleenex at all, they’re not even tissues, don’t they know the difference between long fiber and short fiber cellulose based paper products GAWD!” But in an effort to not seem insufferable, and because I know exactly what they meant, I would just pass the paper towel.

Yes. And I call my vaccum a hoover and my adhesive sticky-backed plastic Sellotape.

Your logic is flawed. Just because you can find an example of a specific product name being used as a generic term does not prove that a different specific product can be used that way.

In the case of Bitcoin, it most certainly will create confusion if attempt to refer to a generic group cryptocurrencies as Bitcoin.


lol, soooo what was wrong with this comment? Downvoters, you think that someone will know you mean the generic class of cryptocurrency if you refer specifically to Bitcoin??

Bait: cryptocurrencies should be allowed just like wildcatting, a "legitimate business".

Switch: securities regulation is unjust.


Those are both true, but unrelated. It's not a "bait and switch" when the comment thread changes tack.

No, you didn't even acknowledge the existence of securities regulation in your original comment, even though the whole premise of it was that things like Grams are, like "wildcatting", legitimate businesses. Only after you were challenged about the existence of securities regulation did you reveal your real position, which is that you believe those regulations lack validity.

That latter argument is, of course, your real point. You could have made it directly. Why didn't you? Why did you instead pretend that it was obvious that Grams should be lawful, because "wildcatting" is?


I was responding to the analogy about gold mining in my original comment. Why would I randomly bring up securities regulation? I think you might have lost the thread a bit.


The "anywhere" thing is weird though as these people don't live in the United States, so the analogy is that you are a Russian citizen living in Europe and you buy a plot of land; now, the US government tells you you aren't allowed to tell people in Europe that you maybe have a gold mine and maybe they should invest in shares of your gold, because, in the case that you do find gold, someone in the United States might one day buy some of it, which is actually kind of ridiculous on not just one but two levels: that the US has jurisdiction over your behavior at all when you aren't yourself a US citizen, you don't live in the US, and you aren't even dealing with other US citizens, because theoretically the people you deal with might one day themselves deal with US citizens (which is an analysis I am just believing from this article: I haven't read the actual complaints from the SEC); but also the very idea that the US thinks that the shares of future gold that may or may not exist might still be a security even after you find the gold (assuming you map it out and know how much exists after you find it, which I think is a reasonable analogy for a post-launch distributed protocol project) because of this weird theory that they sometimes have that "once a security always a security" (which is based on some context I have outside of this article).

The US nexus was established pretty firmly early on in the case: they knowingly sold over $1B USD in "private placements" to US investors, and used US banks. Later, in March-April, after failing to stop the injunction, they attempted to pivot to overseas sales only. But the instruments they're selling are, of course, designed to be liquid and (asymptotically approaching) anonymous; not only that, but the original contracts they had built the offering on might not even have allowed them to fence off US investors even if the capability existed.

The "we'll just sell grams overseas" bit was a Hail Mary pass, performed after they'd already lost the core of their case.


That's not quite right. Imagine you're a Russian citizen living in Russia proper, and you want to sell prospective stakes. Russia rules that you can't do this because you're not accredited, and you're asking people to buy a kind of security.

You then ask if you can sell your security to people in the UK. Russia repeats itself, more slowly this time: No, you're not accredited and you're trying to sell a security - stop it.

So then you explain, "but this isn't just a security, it's a decentralized open security based on cryptographic principles and new technologies and there's computers involved!"

And then Russia repeats itself once more, "No, you're not accredited, it's still a security, what part of this is hard to understand?"


I feel like our disagreement here is based on a different understanding of a fact that I might legitimately have wrong: my understanding is that the owners of Telegram are literally Russian citizens living in Europe; are they actually US citizens? (FWIW, a quick re-check of Wikipedia to verify my memory here is definitely making it sound like the Durov brothers are Russian nationals, but maybe they have now become official citizens of an island in the Caribbean as part of their "self-exile"? I don't think that Saint Kitts and Nevis is a US territory, though.)

Except they didn't want to sell to Russia or Europe. They ALREADY sold to institutional investors in the US and wanted more. But they were attempting to not be subject to the SEC. Not gonna happen.

https://www.reuters.com/article/legal-us-otc-telegram-idUSKB...


> The developers spent $405 million, according to Judge Castel, to develop the new open-source blockchain

O.o


That's not quite right - they did say in the original offering that they would be spending investors' money on Telegram Messenger's daily operations. The judge's words are:

> Telegram subsequently report ed that, from January 2018 to January 2020, it spent $405 million, about 24% of the proceeds from the offering of Grams, on the development of the TON Blockchain and the operations of Messenger.

https://www.courtlistener.com/recap/gov.uscourts.nysd.524448...


As far as I understand it, they're doing this under the Telgram brand, but it's effectively whatever organization "owns" the TON effort and where they are incorporated.

It looks like there are at least two "Telegram" orgs, one located in the UK (according to the Bloomgberg profile), and I'm not clear if this other one is in the US or somewhere in the EU.

There's an issue if they're offering a security (which they basically are). They could make that security available through a foreign regulated market legally, but they can't allow "the world" to buy it. If they could restrict purchasing with a legal framework then they may be able to resist the judge's orders that forces them to never sell it.

But yes, US anti-money laundering law is some very intense stuff.


I agree that the situation you describe seems like an overreach, but the US likes to throw its weight around. For that matter so does the EU (ex GDPR), China, and really any other country. My impression is that most countries will happily ignore jurisdiction, pass laws that they claim apply to the entire world, and then do their best to find creative means of enforcing them on outsiders. See the ongoing Toshiba nonsense for a flagrant example of such. (https://reut.rs/2RDFjMz) (https://www.bloomberg.com/opinion/articles/2019-06-26/everyt...)

That being said, it seems Telegram's situation is far more complicated; I asked about the same thing when it came up previously (https://news.ycombinator.com/item?id=22394276). They are likely operating out of a jurisdiction which is explicitly subject via treaty to at least some US laws. They were also initially selling to US investors, and I suspect that many of their hypothetical overseas investors would have ultimately had to comply with US securities laws for their own reasons at the end of the day.

My take on the situation at this point is that violating laws in a jurisdiction with an extradition agreement to the country in question is generally a bad idea. Moreover, ignoring US securities regulations makes for a poor business plan since it means neither you nor your customers can realistically be located in such a jurisdiction (ie most of them).


> And not only are they telling us we can't sell part of our non-existent gold to our friends, we can't sell it to people ANYWHERE.

well they could, they'd just have to register with the government.

but in this case, registering with the government isn't so simple because that "opts in" to a ton of other regulations which are usually okay, if the group of people weren't also trying to tie membership into their nightclub with whoever currently bears the right to own a piece of the gold mine. Now the regulations for investments are completely incompatible with general merchant services, regulations for consumer goods.

The various governments have a chance to create a framework that works for both, but chooses to rely on the regulator for investments exclusively, or making it too expensive and irreconcilable to ask for clarification.


What you just described is pretty much what nearly every startup in Silicon Valley does. Probably what 95% of startups anywhere do (very rarely, there's a startup where the "gold" is tangibly there, but it's a rare case).

Of course, if they issue securities, they have to comply with securities laws. If that's what Telegram is upset about, then I don't think they have much of a leg to stand on.


> Sound completely unfair? Government overstep?

Yes, if I want to try to create a thing I reasonably believe will have value, and I'm honest about it, there should be little regulatory issue. Considering how many other cryptocurrencies there are, I REALLY don't understand at all why SEC cared about this one. There are far more shadier ones around than TON.

> We aren't allowed to sell people something that doesn't exist?

We do that every day. Commodities futures and stock options. Speculative investments in oil, gas, wind, tech, medicine, cars, etc. SOFTWARE. Not only that, we allow people to pay other people with promises they have the right to buy a thing that doesn't exist at a price we set today (unvested non-voting stock options), because we THINK it might be worth more later, although we fully acknowledge it may cease to exist, or even never exist at all (unvested options in a company that never goes public, or sells, and your shares vanish).


> I REALLY don't understand at all why SEC cared about this one. There are far more shadier ones around than TON.

I guess it's because they believed that TON had the potential to actually become wide spread by it's Telegram integration.

Which makes the regulators sound quite evil. But you can reformulate that as it having potential to cause large, wide spread amounts of damages. ;=)


The SEC is not preventing blockchain companies from selling securities, but only requiring that the same rules be followed that would allow me to sell shares of my gold mining outfit to the public. The problem isn't risk at all, like you said, plenty of securities sold to the public carry enormous risk. The regulations are in place not to prevent failed businesses but to ensure shareholders get their fair due when a business succeeds and have a basic set of facts when considering investments.

Overstock, for instance, has been able to offer their securities on a blockchain. Their application is different from TON but it shows there is a path to doing this if you follow the rules.


It is called the futures and promises market.

Which has established rules and contracts guaranteeing and enforcing the rights of buyers and obligations of sellers.

> We aren't allowed to sell people something that doesn't exist?

Seems reasonable to me


So kickstarter is a place for whom?

Nobody allocates any part of their retirement savings to a Kickstarter for a new board game. Try to start a Kickstarter for an investment instrument and see how far you get.

Yet another venue to sell people dreams. How many kickstarters actually succeed?

At least they promise something material, which is more than one can say about this TON shitcoin


Our little conversation amounts, to me, to "we allow people to sell dreams as long as these dreams are allowed to sell by us". I cannot see how you resolve your allowance for regularly failing kickstarters and your allowance-not for TON.

I see the value in TON beyond material. Compare it to Libra, to give you another point to discuss.

For me, at the very least, TON could be a viable alternative to Libra - it is architecturally about the same PBFT (with useful twists) and, frankly, it does not possess Facebook-or-Libra-associated flaws.


I don't think particularly highly of Kickstarter

What are people actually buying with all these shitcoins? Who are they out there benefiting, en masse, other than crypto nerds and wealthy finance types?

Here's an idea.... channel all that mining power into conjuring money to fix the environmental damage being done from all the power they consume


The regulatory hypocrisy is clear.

Kickatarter interests are not re-sellable or transferable. So they don't meet the Howey test.

I have no doubt that the law is crystal clear, but does it make sense?

> We aren't allowed to sell people something that doesn't exist?

Have you heard of this thing called Kickstarter?


I think we can ethically sell things that don't exist to "sophisticated" investors - which is hard to define but probably based on net worth. Maybe limit the $ amount you can invest per person from "poor" investors to $1000 or something. But the question is, is it a scheme or an investment?

That said people buying crazy options on sites like /r/wallstreetbets, or just betting on sports are in the same boat, so where to draw the line? I think it is better to err on the side of controlling such investment schemes though rather than let them run loose.

The solution to the US controlling everything is to set up truly decentralised currencies like Bitcoin and keep a brand or controller out of that. Someone in the world can do this anonymously and it would be hard to shut down. Has anyone shut Bitcoin down yet?


The US already has a system for this: accredited investors. I believe the thresholds are $200k/yr income for several years or at least $1m in assets.

This makes me wonder if TON ran afoul of the SEC somehow.


They did, as you can read in great detail in the SEC complaint.

When did they outlaw speculation? The stock market? Selling people a future possibility, however likely or unlikely, has never been a crime.

https://en.wikipedia.org/wiki/Ponzi_scheme

You should study a little history before making wild claims regarding 'always' or 'never'.


You should know enough about the topic at hand to realize the difference between it and a Ponzi scheme.

>> you don't even know if there's gold on that land, but you're promising your investors that there is

I think it's very clear in this case that there was definitely gold on that land. The only thing which was unclear was how much gold... But is there such a thing as an enterprise without uncertainty?

The only enterprise that exists without uncertainty in the US is ironically the Federal Reserve Bank. It is the only institution in the world which can print as much money as it wants and give it to whoever it wants. Who is running the real fraud?


This argument makes no sense at all. They never offered to sell the gold. It's more like they offered to sell a share of the gold mining venture. Where the token represents a share of the business.

By that logic we should shut down every company in existence on the basis that there is uncertainty in their future. Especially now with the COVID-19, every airline company's survival is pure speculation; does that mean it should be illegal to buy shares of airline companies now?

I don't care at all about TON at all. But in the context of corporate America, this is completely arbitrary.


All of those companies that you’re talking about “Shutting down” are registered with the SEC, and follow SEC rules and guidelines for selling their securities. If telegram had done that with tan, this would not be an issue.

The SEC is wrong and so is the notion of an accredited investor - The founding fathers would have been appalled at these ideas; they're twisted beyond what they could possibly have imagined at the time.

These laws sound totally anti-constitutional. Doesn't resonate at all with the "Land of the free" idea.

People are not free to start certain enterprises. They are not free to invest in certain enterprises. The only thing they are free to do is accept the fiat money which was printed out of thin air by their corporate masters.

If you live in the US and you're not an accredited investor, I would recommend that you leave the country ASAP before the government puts chains on you.


> founding fathers would have been appalled at these ideas

Look at export-import licensing norms, and the limits on incorporation, in the time of the founding fathers. Enterprise is, on average, far freer today.

> laws sound totally anti-constitutional

They’re not. Congress has vast Constitutional powers to regulate interstate commerce. It used these laws to curtail securities fraud in the 1930s. Those are the laws being violated here.


I have trouble believing the "founding fathers" had much of an opinion on anything like the finical systems of today, let alone how we got there. I'd be surprised if they were able to observe things over time if they felt there should be no limitations on something like TON.

I highly recommend that people read the full SEC complaint: https://www.sec.gov/litigation/complaints/2019/comp-pr2019-2...

It's pretty obvious that Telegram was simply planning to pump and then dump a bunch of worthless tokens on retail investors.


Even if you believe Telegram was competent and well intentioned the SEC's argument here seems clear and reasonable:

Grams are securities because the Initial Purchasers and subsequent investors expect to profit from Telegram’s work ... Grams are not a currency because, among other things, there are not any products or services that can be purchased with Grams.


But how is that different than any other Initial Coin Offering?

In most cases there's no difference and the same arguments would apply also for (against) other ICOs. An ICO can be substantially different in these key aspects and in that case it could be legal, but in most cases they really are intended to be de facto investments in uncertain future profit and risk, i.e. securities.

Here's a random example from two years ago https://www.sec.gov/news/press-release/2018-152 of an ICO being shut down and penalties paid. There are more, SEC has been quite active in regulating ICOs.


All the other ICOs are also scams.

Is ethereum a scam? How about MakerDAO?

Essentially. All of these coins have no real world use and everyone knows it, they just think they will the ones profiting on other idiots who buy it at the end.

Actually, I'm really wondering how all these cryptocurrencies are legal. Algorand also started by selling its initial coins, how is that legal?

Almost no token sales are done legally. Ethereum's token sale wouldn't be legal if it was done today but Ethereum is so large that regulators effectively grandfathered it under the "sufficiently decentralized" doctrine.

- Yes

- Yes


That is a nonsensical statement. ICOs are a way to raise money. There is nothing that inherently deceitful about them. I want to be able to invest into early-stage companies and an ICO is a way.

"there are not any products or services that can be purchased with Grams" at the time of writing.

And I believe omitting the time variable is the greatest omission in what you quoted.


There is no time variable in play here, it’s either a currency at the time that it’s sold, or it’s not. If it’s not a currency at the time that it’s being sold, then it is being sold speculatively – which makes it a security.

Is it possible for something to be sold "speculatively" and not being a security?

Also, can profit be measured not only in money? If so, can something that does not exist be bought to be brought to existence and be profitable and not in money?

For me, TON is an alternative to something like Libra, as I said elsewhere. It is basically same PBFT as Libra (thus - close to realtime operation) but it does not have many Libra flaws.

And I think that is the point the judge missed.


A big difference is that Libra is supposed to have stable value while TON Grams were explicitly designed to appreciate (3x IIRC). Of course, no one is interested in pre-buying a stablecoin years before launch so you can't fund development that way.

Not really. Your security can bootstrap itself into being a currency, but until it does it’s still going to be treated like a security.

You can of course negotiate with the SEC, but they would probably require guarantees, and a definite timeline of your plans... not just the promise of success at some indefinite future date.


That’s the norm with ICOs, I don’t know why anyone is shocked by that anymore.

this is a disingenuous post. The crux of the SEC effort against them is because they created this chain and token during the 2017 gold rush (actually in 2018 but obviously the 2017 bull run is what sparked the interest) and very clearly were trying to cash in. When you create what by all accounts is a security specifically for investment and asset appreciation but don't register it as a security with the SEC, they get a little unhappy. Reading back through some of the articles before this when the SEC intervened Telegram had raised 1.7 billion dollars off this. When you make a few billion off an unregistered security offering, people are going to sit up and take notice.

Regardless of your feelings on the SEC, crypto, et al, it's pretty obvious why the SEC intervened and to see this eventual outcome.


> Reading back through some of the articles before this when the SEC intervened Telegram had raised 1.7 billion dollars off this.

I think I understand the "more in sadness than in anger" tone of the post better now too. They did fine for themselves didn't they.


Not really. They have to return $1.2B (either in cash or equity) and their burn rate is high. Now they have to find a new business model before the runway runs out.

So they get to keep half a billion and never had to offer anything of value?

The amount they get to keep cake from accredited investors, so I don’t really feel any sympathy there.

They have to return the investments though,so I wouldn't say they "did fine". Back at square one, having spent a couple of years on a project.

Previously: "SEC halts Telegram's $1.7B token offering" (7 months ago, 201 comments): https://news.ycombinator.com/item?id=21228415

“We allege that the defendants have failed to provide investors with information regarding Grams and Telegram’s business operations, financial condition, risk factors, and management that the securities laws require.”

“Telegram seeks to obtain the benefits of a public offering without complying with the long-established disclosure responsibilities designed to protect the investing public.”


When reading this article, I got an impression that US government banned Telegram from issuing certain securities, but after reading comments and links I come to the conclusion it's not the case and actually US government just said "it's a security, so you have to follow our securities procedures". Granted, those are not very fun, but that's not what Telegram complaint is - it looks like they tried to sneak a fast one and it didn't work. Well done Telegram marketing for temporarily misleading me, I guess.

Yes, their article is very one sided.

Through why they ended up in the situations they did why other didn't is a bit more complex then what either you or they wrote I think.


What do they have to hide?

Filing for a US initial public offering requires much writing and some audits, but it's not inherently difficult. Thousands of marginal companies have done IPOs. That's where penny stocks come from. The SEC doesn't evaluate your business model. All they insist is that you don't lie.

Now, if you want to list on an exchange, have your IPO underwritten by a major financial firm, and get institutional investors to buy your stock, there's more to do. But those aren't SEC requirements. You can IPO without them and peddle your own shares.

[1] https://www.sec.gov/rules/other/2018/34-83723.pdf


As a long time Telegram fan - albeit less than before - I'm happy to see this go:

Why do everyone have to try to create another blockchain?

Why can't companies just be honest enough to either name a price up front or make a freemium model or something?

Hopefully this will cause them to reconsider payments like old WhatsApp or something else that aligns with the interests of the users?

Edit: add second part of a broken sentence. Also: the niche that WhatsApp used to hold (paid, reasonable price, good ux, no ads or spying) still isn't too crowded.

Signal is important and I am happy to recommend it but there's a lot of room still for others who want to enter the small communities/group-of-friends messaging space. The best alternatives I have found so far are: MeWe (pretty close to Google+, but with a business model that isn't based on selling data or ads), Telegram and of course still WhatsApp if you can stomach it.


The Durov brothers got screwed by the Russian government so I can imagine why unregulated money appeals to them. If they created some kind of PayPal 3.0 in their minds they would probably just be waiting to be robbed by some government(s).

> Why do everyone have to try to create another blockchain?

Because people will give you a billion dollars for it.


> Because people will give you a billion dollars for it.

Hopefully we see the end of that now. Or at least the beginning of the end.


Why are you a long time Telegran fan considering that their end-to-end encryption sucks in comparison to WhatsApp, Signal, et al

Their product was (and still is) superior in its user-facing features.

Agreed, it's so fast and simple but quite powerful too if you care to dig deeper

who cares about security right?

Most people don't, and that's the sad truth.

Eleven paragraphs to say, "I'm taking my ball and going home!"

When the SEC shuts down your unregistered securities offering, saying you saw the project as a literal gold mine is maybe a poor choice of analogy.


I wonder how Telegram will subsist and how it’s going to generate money for the longer term.

Since it stores all messages and media by default (except secret chats) on its cloud, the infrastructure costs will keep going up at some pace with time.

It was only a few weeks ago that Telegram announced that it has 400 million monthly active users.

How long can Pavel Durov’s wealth keep it alive and how much of his wealth will he continue to commit to the platform as time passes? The platform is surely synonymous with him (at least from his perspective), and there are millions of people who need it and trust it (it’s the only app that large groups of protestors in Hong Kong could safely use).


They will convert TON investments to equity investments. Which is probably what Silicon Valley VCs wanted in the first place. Now Durov holds 100% of equity.

Think WhatsApp back in a day before Facebook acquisition.


I've found David Gerard's periodic updates to be useful (on this and other cryptocurrency nonsense/scams/etc). His latest one about Telegram is: https://davidgerard.co.uk/blockchain/2020/04/14/news-cooking... Link to the "telegram" tag on his blog: https://davidgerard.co.uk/blockchain/tag/telegram/

Looks like the Matt Levine of crypto, even down to the "Things happen" section.

He's definitely copying Matt Levine's style.

I blatantly am!

Posting has slowed lately because I'm finding myself busier during lockdown - loved one is ill (not Covid thankfully), so the day is: day job, do all the house stuff, take care of kid and wife, collapse and sleep, repeat - but I gotta write something about the end of the TON story ...


this is absolutely the highest praise, thank you


> Unfortunately, we – the 96% of the world’s population living elsewhere – are dependent on decision makers elected by the 4% living in the US.

Calling your bluff on this one. Other world powers are available if that's really your argument.

It turns out that if you want customers in the US, then yes you have to follow US law.


This seems like one of those situations where the world benefits from one country doing the homework and moving to protect its citizens. I mean, if another country wants to okay pump and dump scam coins, or bogus medicine, or unsafe cars, they're free to do that. Otherwise, others might as well benefit from SEC, FDA, and NHTSA results unless overridden locally, no? Sure, US agencies not perfect, captured even sometimes, but pretty sure tiny Elbonia doesn't have the resources to vet securities, drugs, or cars.

While broadly true, other countries regulators need to be active and keep the American regulators in check.

The entire episode with FAA and Boeing 737-MAX makes it clear that while Ethiopian regulator can not do airworthiness certification of such a complex plane they can definitely ground the fleet faster than FAA wanted to do.

It is unlikely that FAA would have grounded the fleet until all other major bodies had done so and put it under a lot of pressure to also do so.


The graphic at the top and the first few paragraphs come off as extremely patronizing, if not propagandistic. Then he goes off on a rant about sovereignty to cover for TON's lack of legitimacy.

Not a good look for Telegram, and good riddance to TON. I realize this blockchain garbage is probably never going to die but it is good to see the real world doing what it does best.


To all the people says that they should have just followed security laws, you don't understand the purpose of TON and GRAM. It CAN NOT work if it is a security. The Idea was that Telegram user have a wallet and can store/send GRAMs to each-other Donate/tip and buy stuff. This is not possible/allowed with securities. You can only buy/sell securities form/to regulated exchanges. It completely destroys it's whole use-case.

Anyway they could still do it with some kind of distributed token generation, similar to mining so tokens are generated by the users and not sold. But this obviously would not make the investors happy because they get nothing then.


Then don’t use a metaphor of a gold mine. If you compare TON to shares of a gold mine (what they did in the linked blog) then clearly it is a security.

Ofc it is a security. I just pointed out why they tried to avoid it. Not because they where to lazy to do the paperwork like half the people in here suggest.

so you're saying "it's a security, but it shouldn't be treated as security because security law forbids <enter activity here>", which means you want to break the law.

they tried to break the law so it's not allowed. i don't see a problem here


No, absolutely not. I made none if these statements at all. Read it again pls.

> Imagine that several people put their money together to build a gold mine.

This is what's wrong about what they're trying to do.

TON is selling tokenized access to the supposed gold mine. The gold is the TON product which is just a chat software.

I'm glad regulators ban it. It's a scam.

You need to look at the gold, the business. The BNB Binance token could be a better token. At least, their business has better prospect. I would stay away from these tokens. They're just security masquerading as crypto. They're likely scams.


Maybe I don't get it but the gov didn't ban TON. It banned the sale of said tokens. Nothing stops them from further developing the tech with VC money.

That's how you know it's not about the technology; it's all about getting rich quick. Once that has been taken away they lost interest in developing TON.

I think it's safe to say that without fungible tokens (Grams), the blockchain itself (TON) isn't very interesting (despite what they want you to believe).

Furthermore, it only banned the sale of said tokens to americans and in USA - if TON is so great and certainly profitable, I'm sure there are lots of wealthy Saudi or Chinese investors that would be glad to invest. It's just that the "greater fool" theory of investment fails if everyone knows that they won't be able to unload these securities to unsophisticated mass market in USA.

It looks as if Durov wants to distance himself and Telegram from the cryptocurrency subproject, in connection with the latest claims of regulatory authorities.

Just wait until governments actually start attacking cryptocurrencies. They're dumb and slow but when they finally catch on, the game is up.

All these stupid glorified link lists have never been backed by anything other than speculation and eventually market forces will always win.


> Just wait until governments actually start attacking cryptocurrencies.

> eventually market forces will always win.

How is government intervention an example of market forces winning out?


Regulation is an essential market force. Level playing fields and all that.

It often over extends, misses the target and/or doesn't address root causes which is why you hear a lot of hate.

When enough people in the right positions become incentivized to act, you'll see change.


It was "banned" because they did not register the offering, not because the "people did not want the gold for themselves", in their childish analogy.

Admins, please fix this clickbait title. Compare to the TechCrunch story that's titled "Telegram abandons its TON blockchain platform".

I don't exactly understand how US court could forbid Telegram anything. Yeah-yeah, there is an "explanation", but I have hard time buying into it. USA can have far more power than it should, but by no means it's all-powerful, there is a ton of shit in the world that USA may not like, but it exists anyway and even manages to have USA-based customers through some shady as fuck, absolutely nonsensical, but still somehow legal schemes.

So I'm reading this as "our plan has failed for whatever reason, so now we are getting rid of it, while pretending that it is a very hard decision for us and somebody else entirely is to blame".


The key word is "our" in "our best engineers". If it is "theirs", it is not decentralized, it does belong to them. It is faster and more efficient exactly because of that. This is the same mistake all private blockchain creators do, they don't understand the connection between mining and decentralization. Bitcoin and Ethereum are decentralized only because of highly inefficient mining.

The key difference between decentralized and centralized is a judge can jail a person (durov) or bankrupt a company (telegram), but she can't do any of these things to a protocol (bitcoin).


If they really cared about decentralization, they would still release the protocol and software even if they cannot profit from it. I'm tired of greedy cryptocurrency advocates putting on airs of social responsibility.

It's on Github; did you look for it?

OK so they built this great blockchain and you can't continue but where is the link to the source?

[0] https://test.ton.org/


I like Telegram as an app and service but have reasonable doubt of how it’s gonna be sustainable. WhatsApp had 400m MAU and $1m monthly cost in 2013 before acquisition, Telegram reached same MAU recently and avg cost is 4x or more. Founder had about $300m when forced to exit VK. If my math is right, he can’t really keep running this all free much longer.

So... why not just leave that feature out of the US versions in the app store and everything is fine. Or am I missing something?

> am I missing something?

Telegram sold boatloads of these to American institutional investors.


Perhaps even more paradoxically, the US court declared that Grams couldn't be distributed not only in the United States, but globally. Why? Because, it said, a US citizen might find some way of accessing the TON platform after it launched. So, to prevent this, Grams shouldn’t be allowed to be distributed anywhere in the world – even if every other country on the planet seemed to be perfectly fine with TON.

> Perhaps even more paradoxically, the US court declared that Grams couldn't be distributed not only in the United States, but globally. Why? Because, it said, a US citizen might find some way of accessing the TON platform after it launched. So, to prevent this, Grams shouldn’t be allowed to be distributed anywhere in the world – even if every other country on the planet seemed to be perfectly fine with TON.

Why would telegram ask the court to clarify that the injunction applied globally if telegram believed the court did not have jurisdiction to enforce such a global order?

> In the ongoing enforcement action SEC v. Telegram Group, Inc. and TON Issuer, Inc., Judge P. Kevin Castel has denied an application by Telegram and TON Issuer (collectively, “Telegram”) that, if granted, would have allowed Telegram to distribute its cryptocurrency, Grams, to non-US based purchasers. Telegram’s application asked the court to limit the scope of the court’s recently issued preliminary injunction. The injunction prohibited Telegram from distributing Grams, reasoning that the initial purchasers would likely resell the Grams in a public market that could include US persons. Telegram sought clarification that the order did not prohibit the distribution to foreign initial purchasers. The court rejected Telegram’s request, reiterating its finding that Telegram’s distribution, even if made only to foreign initial purchasers, would likely result in a distribution back to the US.

https://www.dlapiper.com/en/us/insights/publications/2020/04...


Very odd outcome considering they didn't do much different from Ethereum or EOS, both of which seem fine nowadays.

I think it would have been different if they were to release their coin first, ask questions later.


> blockchain platform called TON and a cryptocurrency we were going to name Gram

And no one in marketing said anything about naming your platform and curency after units of mass. How come no one raised the SEO issue?


Telegram has hundreds of millions of existing users; they don't need SEO.

Is KiK still fighting SEC? This can't be good news for them as well.

If you sell shares in a gold mine it is a security. All SEC wanted is for TON to be treated like a security, which is exactly what shares in a gold mine are.

The opening image looks like the start of a scam: https://telegra.ph/file/c6f281b62b5909d0c5bad.png

Group of faceless people against a scenic vista, arms around and supporting each other, under the flag of the "product", facing a gold mine that apparently self-produces gold and a sun that just so happens to be shining light on all that wonderful gold... with a dog(?) chasing a golden butterfly.

I've never used telegram before but I think the CEO should distance himself a bit more.


Why Durov have decided to subject to US jurisdiction? Afaik many ICO had put restrictions on accessing tokens by US citizens?

Considering that conventional currencies represent real goods, what thing of value is represented by these crypto currencies.

This was inevitable after the SEC got involved.

Their first mistake was being subject to US jurisdiction.

No, that's wrong. It seems like they didn't get good legal advice, and/or changed their business plan without ongoing legal advice.

That is, if they knew that they'd be violating US securities and/or money laundering law, they should have avoided US jurisdiction.


just another crypto pyramid scheme

...and nothing of value was lost.

So do people get refunds...?

Do people who get scammed in telegram's fakecoin get-rich-quick IPO channels deserve refunds, let alone any funds at all?

Yes, there will be partial refunds.

What does "partial" mean? Will investors sue him?

This is good for the environment.

Wasn't TON using proof of stake?

They are basically blocking USD competitors. This makes a lot of sense, doesn't it?

Update: The SEC statement makes more sense than my original comment :)


People unhappy with USD can always use USDT, opportunistically printed in hundred million "dollars" equivalent per month by 3 semi-anonymous guys in non-extradition offshore and which was dropped like a hot potato by the only auditor company who even considered auditing this scam. There is only one small flaw in this plan - for some weird reason not many people are rushing to adopt this toilet paper "currency".

Well, those billions of fake dollars are being used to buy Bitcoin, which props up its price, which attracts excited retail investors to buy Bitcoin — so in fact people are rushing to buy the USDT toilet paper, they just don't know it.

Or you could say they are blocking obvious pump-and-dumps.

Libra is allowed to exist though. Or I suppose it doesn't compete with USD as it will be tied to fiat?

This is only my guess, but it should be so much easier to control and regulate Facebook's product rather than Telegram's, right?

Libra is not selling rights to non-existent tokens. That’s why it’s not a security while TON is a security. No one banned TON, they just said that if you fundraise by sale of tokens then said tokens are securities. Which is a fairly straightforward truth.

It does from a short sighted, tyrannical, perspective.

It's not like I'm defending them. Just trying to understand the real reasoning behind this decision.

I highly recommend that you read the original SEC complaint. It lays out the reasoning quite clearly.



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