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?
> 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.
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.
Basing your legal theory on fiction movies is not a great move.
In the case of Bitcoin, it most certainly will create confusion if attempt to refer to a generic group cryptocurrencies as Bitcoin.
Switch: securities regulation is unjust.
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?
The "we'll just sell grams overseas" bit was a Hail Mary pass, performed after they'd already lost the core of their case.
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?"
> 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.
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.
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).
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.
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.
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 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 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. ;=)
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.
Seems reasonable to me
At least they promise something material, which is more than one can say about this TON shitcoin
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.
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
Have you heard of this thing called Kickstarter?
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?
This makes me wonder if TON ran afoul of the SEC somehow.
You should study a little history before making wild claims regarding 'always' or 'never'.
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?
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.
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.
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.
It's pretty obvious that Telegram was simply planning to pump and then dump a bunch of worthless tokens on retail investors.
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.
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.
And I believe omitting the time variable is the greatest omission in what you quoted.
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.
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.
Regardless of your feelings on the SEC, crypto, et al, it's pretty obvious why the SEC intervened and to see this eventual outcome.
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.
“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.”
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.
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.
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.
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.
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.
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).
Think WhatsApp back in a day before Facebook acquisition.
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 ...
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.
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.
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.
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.
they tried to break the law so it's not allowed. i don't see a problem here
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.
All these stupid glorified link lists have never been backed by anything other than speculation and eventually market forces will always win.
> eventually market forces will always win.
How is government intervention an example of market forces winning out?
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.
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 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).
Telegram sold boatloads of these to American institutional investors.
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.
I think it would have been different if they were to release their coin first, ask questions later.
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?
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.
That is, if they knew that they'd be violating US securities and/or money laundering law, they should have avoided US jurisdiction.
Update: The SEC statement makes more sense than my original comment :)