A TON of Troubles: Pavel Durov Fighting SEC Resistance

2019 was a tough year for Pavel Durov and TON.

The serial entrepreneur announced and made attempts to launch the Telegram Open Network, or TON — the blockchain associated with his Telegram messenger. It is designed to allow users not just send messages and emojis to each other, but to use the app’s underlying blockchain to transact cryptocurrency known as Gram in an absolutely trustless and secure way.

But the United States Securities and Exchange Commission had completely different viewpoint on the release of Telegram’s new blockchain product, filing an emergency restraining order in October, trying to stop the initial coin offering (ICO) after it raised $1.7 billion in an unregisteered sale.

At the time SEC Division of Enforcement co-director Stephanie Avakian stated:

“Our emergency action today is intended to prevent Telegram from flooding the U.S. markets with digital tokens that we allege were unlawfully sold. 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.”

But it seemed that this was not enough for Telegram to stop the ICO — the SEC located evidence that the company continued to sell the token after that. Now Telegram joins those companies who want to leverage crypto but are being held back by authorities. Telegram has around 200 million users worldwide, and the TON blockchain would give them a token-enabled economy to take part in online. But for the U.S. authorities it seems illegal.

In early January, Pavel Durov gave a deposition in Dubai regarding TON and the ICO, which is accessible online. As the U.S. authorities attempt to destroy his project, such state of affairs resembles that of Durov’s earlier career at VK, the Facebook-like social network which took Russia and Eastern Europe by storm.

Resistance is not something new for Durov

This is not the first time Durov facing controversy, especially if we remember his native Russian government. When the Kremlin requested access to VK user data to find protestors in 2014, he sold his stake in the company and left the country. Durov and his brothacinger had already launched Telegram in mid-2013, so they just focused on it.

Telegram was surrounded by controversy long before talks about blockchain for payments and transacting. The app employs encryption and highly secure technologies which prevent third parties from monitoring or blocking conversations. Thus, it found use among ISIS fighters and propagandists. The addition of blockchain did not add the company any respect in the eyes of regulators.

According to some sources, TON has been ready for launch for some time. After the presale in March 2018, Durov and his brother stated that they are planning to launch that autumn, but it is not happening this far. The SEC’s injunction against Telegram only exacerbates that delay. Purchase agreements for the Gram tokens stated that if the network was not launched by October, investors would have right to request a refund after a vote. 2019 was a year of bureaucracy hampering progress for Durov.

Currently TON runs in private testing mode, showing “extremely high transaction speeds,” but this is not where company planned to be by now. Pavel Durov and team expected to have a robust TON blockchain for a couple hundred million users by now. Instead, they have to struggle against the regulators, unable to move forward as they wanted.

We’ll see if they can get out of the legal puzzle created by the SEC which seems increasingly interested in making an example out of TON. This resistance seems to be more galvanizing for Durov than anything else. If 2019 was a tough year for TON, 2020 may see the project launched and operating. Durov started his entrepreneurship in Russia, and has enough experience dealing with business pressure and problems caused by the government there. TON’s current difficulties resemble that of that same drama from the past.

Durov exhibits some mindfulness practices — he meditates, does not eat meat, and keeps a consistently cool demeanor in public. This means, that if he will come to any meeting required of him, he will probably do that with a cool head and a soft voice. He knows what it is like to operate the company facing resistance, so we do not expect him to give up just yet.