11 ms·

SEC blocks the Telegram ICO – what this means, and what happens now

157 points by davidgerard 7y ago

dang 7y ago
Recent related thread: https://news.ycombinator.com/item?id=21228415 https://news.ycombinator.com/item?id=21228415
JumpCrisscross 7y ago
> Telegram refused to accept a subpoena Within the sea of stupid that was this endeavour—single-issuer token pretending not to be a security, the wholesale scam that are SAFTs—this really takes the cake.
- snagglegaggle 7y ago
  I think that's arguable. You're completely within your rights to refuse an unlawful order from a police officer. That it usually would lead to you getting shot reflects poorly on our society, not on the judgement of the person refusing the unlawful order.
  - JumpCrisscross 7y ago
    > You're completely within your rights to refuse an unlawful order from a police officer Subpoenas are court-ordered requests for documents. If you disagree with them, you fight them in court.
    - snagglegaggle 7y ago
      Resisting unjust legal action (initiated either by officer or judge) can happen any number of ways, including telling the court to stuff it. Plea deals are the overwhelming number of convictions in the US, something like 90%. Most people do not have access to legal recourse and trusting any US court to operate sanely is a bad idea. Best to avoid it if you can.
      - JumpCrisscross 7y ago
        > Most people do not have access to legal recourse This is a red herring. Telegram have access to lawyers.
        snagglegaggle 7y ago
        It's not. They have access to lawyers, but can they outspend the SEC or any other agency that wishes to participate? One of the best predictors of whether a lawsuit succeeds is money spent.
        nl 7y ago
        Another good predictor of lawsuit success is what the law says, and in this case it's pretty clear Telegram is in the wrong.
        snagglegaggle 7y ago
        Ehh, no; and frankly, it's like you've not even read my comments at all. If you have please speak to some specific argument they bring up. Otherwise, repeating the opposing argument serves no point. It's almost always about money. On the defensive side, there are enough ways to stall that you can almost always outspend someone to win. On the offensive side, you can spend more time investigating and almost assuredly turn something indictable up. Have you really never heard of this?
        JumpCrisscross 7y ago
        > It's almost always about money As someone who as gone through a fair deal of litigation and arbitration, this is wrong (or at the very least, inapplicable). It’s a common armchair lawyer’s myth. If your opponent has more than $100,000 the tables are fairly even; more than $1 million, totally even. There is a ceiling to court costs, and a finite amount of time before judges issue rulings. (Spending to try and get an outcome predictably pisses off judges.) Getting to a judge costs money; once you’re there, American courts are robust. At an individual level, these thresholds are prohibitive. At a corporate level, they’re not. Exhibit A for you should be the SEC’s win-loss record, even against individuals. (It’s mixed.)
    - patio11 7y ago
      FYI: The SEC can issue an "administrative subpoena" on its own authority, created by Congress. They're only tested in court if you refuse, at which point the SEC (or similar agency) can go to any court of competent jurisdiction. This is not an unusual state of affairs; something like ~300 federal enforcement missions can independently issue subpeonas.
    - celticninja 7y ago
      If the court is in your home territory this may make sense. If, for example,you got a subpoena from a high court in Saudi Arabia, would you respond? Would you even hire a local lawyer? Nope,you would wait until it was filed in a court in your country of operations.
  - EpicEng 7y ago
    Which order is unlawful in your mind?
    - snagglegaggle 7y ago
      It is not necessary that I agree, but probably that the Telegram offering is not a security. Sure, "all they had to do was file" but that is a pretty onerous requirement if you think you're not a security, and hugely restricts your market. The Telegram token may increase in price but there's no profit sharing directly from Telegram. It's as if you funded a kickstarter for a limited edition trading card and the company was going to soon start printing more. Nobody is actually commenting on this argument. It just seems like there's a team of people following me around downvoting me.
      - EpicEng 7y ago
        >but that is a pretty onerous requirement if you think you're not a security But the SEC does, so tough luck? >The Telegram token may increase in price but there's no profit sharing directly from Telegram Sounds like a weasely attempt to skirt the rules. Look up the Howey test >The leading case on the definition of an investment contract is the U.S. Supreme Court case, SEC v. W.J. Howey Co. Under the Howey test, an investment contract is “a contract, transaction or scheme whereby a person invests his money in a common enterprise[1] and is led to expect profits solely from the efforts of the promoter or a third party.”
  - throw_m239339 7y ago
    How is that subpoena "unlawful"?
- paveldurov 7y ago
  If you'd like to join our legal team you can reply with your résumé!
mikece 7y ago
So it's not that the blockchain or exchange systems where insecure, only that tokens available at the ICO were being sold below par to investors? Setting aside the giant red flag that is refusing to accept a subpoena, if the ICO tokens are revalued to take away the discount to early investors would it then be legal?
- JumpCrisscross 7y ago
  > if the ICO tokens are revalued to take away the discount to early investors would it then be legal? No. The tokens are securities. They are issued by a single issuer to fund development of a product which doesn’t presently exist, with early investors in SAFTs buying them on expectation of profit. In any case, how would you value the discount? You don’t know the price until a market exists. And by that point, the 171 early investors have already dumped their pump on retail investors.
  - davidgerard 7y ago
    It's worth noting that quite a lot of the VCs in question had already written off their investments in 2017-2018 shitcoin ICOs. This is why said VCs were suggesting to Coinbase last month that they list all these shitcoins that nobody even trades now, but which the VCs just happen to be holding massive bags of: https://blog.coinbase.com/coinbase-continues-to-explore-support-for-new-digital-assets-70419575eac4 https://blog.coinbase.com/coinbase-continues-to-explore-supp...
- bagholder-alert 7y ago
  You imply that Telegrams “Gram” has any buyers other than the early bagholders.
  - throw_m239339 7y ago
    Is it the same stunt as Bitfinex and LEO backed by USDT "backed" by dollars? How is the lawsuit working for NY attorney General by the way? These guy just feel untouchable… it's unbelievable what they can get away with…
jorvi 7y ago
> The Telegram Open Network is probably dead. The emergency order stops Telegram from “delivering Grams to any persons, or taking any other steps to effect any unregistered offer or sale of Grams.” This is worldwide — not just for the US. This completely blows my mind. How does the SEC have any power in telling a hypothetical European situated in Europe if they can or can't buy Gram from European sellers..?
- SpicyLemonZest 7y ago
  That's how it generally works. If you're subject to a court's jurisdiction, and the court orders you not to do something, you can't dodge the order by just doing it in some place where the court doesn't have jurisdiction.
  - jorvi 7y ago
    But that is not how it generally works. If Unilever gets told by a UK court they can't sell peanut butter because that court doesn't like peanut butter, it doesn't mean Unilever is suddenly forbidden from selling peanut butter in the USA. Edit: to clear up the analogy - UK courts don't have a say over what Unilever can and can't sell in USA jurisdiction. Likewise, the SEC can (should?) only regulate trade within USA jurisdiction or by USA entities. If Telegram wants to sell Grams on the UK market, Telegram should be able to tell the SEC to go pound sand, as any USA court orders don't mean jack outside that jurisdiction
    - shakna 7y ago
      > Edit: to clear up the analogy - UK courts don't have a say over what Unilever can and can't sell in USA jurisdiction. And the SEC is dealing with what is being sold in the US. > committed to flood the U.S. capital markets with billions of Grams by October 31, 2019 > sold more than 1 billion Grams to 39 U.S. Purchasers, raising $424.5 million from the U.S. market
      - jorvi 7y ago
        And the article says > This is worldwide — not just for the US I even quoted that in my parent comment.
chubs 7y ago
I don't understand why the SEC (america) has jurisdiction to 'block' Telegram's operations (legal domicile in London) - am I missing something here?
- deleted 7y ago
  [deleted]
- JumpCrisscross 7y ago
  > I don't understand why the SEC (america) has jurisdiction to 'block' Telegram's operations (legal domicile in London) Because Telegram “committed to flood the U.S. capital markets with billions of Grams by October 31, 2019” and “sold more than 1 billion Grams to 39 U.S. Purchasers, raising $424.5 million from the U.S. market” [1]. [1] https://www.sec.gov/litigation/complaints/2019/comp-pr2019-212.pdf https://www.sec.gov/litigation/complaints/2019/comp-pr2019-2...
- detaro 7y ago
  They're active in the US, selling to US investors, ...
seibelj 7y ago
Alternative: telegram launches anyway, and the SEC does... what exactly? Bans them from being traded on US exchanges? It would be impossible to stop the software, just as they can’t stop bitcoin.
- JumpCrisscross 7y ago
  > telegram launches anyway, and the SEC does... what exactly? Refers Telegram to the DoJ for criminal prosecution, which results in bank accounts being frozen, any SAFT holders (or anyone else) who sold their Grams being on the hook to the buyers, and the seizure of Telegram’s assets in America and anywhere else with a mutual prosecution treaty, which covers much of the EU. At the point of wilfully defying a court order to sell securities, it becomes fraud and potentially money laundering.
  - seibelj 7y ago
    But these are foreign corporations? I think I’m confused about how Russians, with offshore corporations, and foreign bank accounts, can suddenly be banhammered by the SEC...
    - davidgerard 7y ago
      Where are the two corporations that substantially control your app being on phones located?
      - seibelj 7y ago
        Ok so the SEC order really has teeth because they can use it to pressure Apple and google to remove telegram from their app stores? That’s a significantly less impressive penalty than what Internet lawyers have been telling me.
        nl 7y ago
        There's a few other obvious things: They can sanction individual directors (ban them from holding office in any US corporation) They can freeze any US assets They can ban any US companies transacting with them
schmichael 7y ago
With each new cryptocurrency drama due to flouting AML/KYC regulations, flouting securities regulations, collapsing/exit-scamming exchanges, murders, drugs, sex trafficking, let's not forget: PoW is an ecologically irresponsible algorithm.[1] Altogether cryptocurrency is such a terrifyingly irresponsible ecosystem, I'm surprised anyone wants to be involved in it. [1] https://www.sciencedirect.com/science/article/pii/S2214629619302701 https://www.sciencedirect.com/science/article/pii/S221462961...
- ajconway 7y ago
  This one is PoS though.
  - schmichael 7y ago
    Supposedly, AFAIK it's vaporware and may never be released. Even if it is functional PoS (which sounds like a codified plutocracy, but I could be wrong), they still managed to botch securities regulations. Even if they sneak past that somehow, it seems likely they'll also fall afoul of AML/KYC regulations. Maybe not! Maybe they're finally the ones who will do it all! Legal and ecologically responsible! If so they're off to a very bad start.
    - zzzcpan 7y ago
      Do fully legal cryptocurrencies even make sense? They have to be legal only to sneak past regulations and gain adoption, but still somehow escape government control, so that AML, etc. cannot be enforced.
- austhrow743 7y ago
  Isn't all that the stuff that makes crypto exciting? Its the wild west come again. A new frontier. Appeals to the desire to expose oneself to risks for profit. To do something that maybe you shouldn't. To operate outside of the soft, protected existence of mainstream first world society. Bowl without the bumper bars. Absent that emotional fulfilment its just boring old money.
aey 7y ago
SEC is blocking their launch. On the face of it, telegram has been complient with the SEC up to now and have filed exemptions for their sale. https://www.sec.gov/Archives/edgar/data/1729650/000095017218000060/xslFormDX01/primary_doc.xml https://www.sec.gov/Archives/edgar/data/1729650/000095017218... On their own discounts are not illegal. I think what’s obvious is that the network is not truly decentralized and depends on telegram and investors expect to profit from telegrams work on the network. So they should probably file an s-1 and follow the blockstack route. What would have been ironic, is if TON was truly decentralized and independent of telegram than the network would have been launched anyways.
- snagglegaggle 7y ago
  >I think what’s obvious is that the network is not truly decentralized and depends on telegram and investors expect to profit from telegrams work on the network. This matches exactly the concept of collectible items. In fact, there's a blockchain based TCG: https://godsunchained.com/ https://godsunchained.com/. Is the point of the card packs not in large part speculation? One card apparently went for ~$60k, and there is a discount being offered for early buy-in.
  - aey 7y ago
    Eh, magic cards have independent value from the company, and MtG sells them at a fixed price to consumers. If you want a decentralized TON, get all the investors together and launch a genesis block with the open source code. That’s basically what EOS did.
- noxer 7y ago
  Read their paper, they stated form the beginning that TON isn't able to launch decentralized. The initial investment to run a node is to high so they can't just put some binary on the net and ask people to run it. They planed to run every node in the beginning to show that it works and then everyone can join (with no control over who joins) but to join you have to have GRAMs so by stooping them to distribute grams they basically made it impossible to decentralized. Although they could still give out GRAMs, start the network and just ignore the SEC. Technically the network would decentralize over time but for that to happen there must be a market for GRAMs. Who's gonna obtain "illegal" GAMS to run a node and get paid with "illegal" GRAMs which can only be sold "illegal" again. And even people would do the services on TON are meant to be used by the masses if they can't simply buy GRAMs the whole thing can't fuel itself.
aakilfernandes 7y ago
The author of this article is turning inches into miles. SAFTs aren't dead. The SEC is alleging Telegram has failed to deliver the promises it has made, so the SEC is pre-emptively stating they need to halt delivery. Presumably, once they complete their promises they'll be able to deliver Grams. From the SEC Complaint: The Whitepaper spoke of potential future products and services that investors could use in connection with Grams, but also made clear that these products were not available at the time the Offering began and would not be available by the time Defendants delivered Grams to Initial Purchasers. Telegram, however, does seem to be in a pickle regarding the PoS consensus model. The SEC seems to be alleging that in order for the network to be sufficiently decentralized, having only qualified investors staking is not enough. Also from the SEC complaint: Defendants knew, however, that to actually implement the TON Blockchain in the real world, the project would require “numerosity”: a widespread distribution and use of Grams across the globe. Indeed, by definition, the TON Blockchain can only become truly decentralized (as contemplated and promoted in the Offering Documents) if Grams holders other than the original Grams purchasers actually stake Grams and, thereby, act as “validators” of transactions on the TON Blockchain. Stated differently, if the original Grams purchasers alone all immediately staked their holdings, the TON Blockchain would be centralized rather than decentralized and, therefore, subject to misuse and majority attacks. This fundamental need for additional Grams holders demonstrates that the TON Blockchain was designed from inception to require the Initial Purchasers to immediately distribute their holdings to the public.
- H8crilA 7y ago
  Indeed what they want is an S-1 or an F-1 form filling. A security registration. That's it. The SEC has no opinion on the offering other than they think it's a security (this claim itself could also be challenged), and as such has to be registered under the 1933 act.
  - cwyers 7y ago
    What are the odds that Telegram, despite believing they didn't need to do an S-1 or F-1 form filing, complied with the letter of everything that the form filing is intended to determine? They would likely have to materially change the offering so that the form filing didn't invite another action.
znpy 7y ago
Meh, it looks like the US wants to have a say in what people in other countries are doing, again.
- ryanlol 7y ago
  This is about the US wanting to have a say in what those people do in the US.
stevespang 7y ago
Listing Grams on exchanges — to skin the retail suckers . . . which essentially is just what is done with IPO's in the stock market, quite legally and unethically, big institutions buy, they pump it up, then dump it on the retail suckers at the height, then the bottom falls out.
teslaberry 7y ago
i was there when telegram presales were happening in backchannel investors trying to flip tokens on one another. if you don't know you're the sucker, then you're a fish that got stuck with tokens. the sec isn't protecting older investors, cause they will never get their money back. tokens of all sorts remain a method to scam people out of btc, which only even works because btc itself is a rising bubble. imagine an economy based on trading facebook shares. but imagine if facebook shares didn't rebound from 19 but went to 50 cents. well, right now the entire cryptocurrency economy is still banking on bitcoin NOT going back to 1000 dollars. good luck on that one. if bitcoin doesn't go to 100,000 dollars, no one who invested in telegram will ever make a profit if they are still waiting to exit like the sucker that they are.
octomatic 7y ago
https://cointelegraph.com/news/telegram-responds-to-investors-on-sec-action-hearing-set-for-oct-24 https://cointelegraph.com/news/telegram-responds-to-investor...

157 points by davidgerard 7y ago

dang 7y ago

Recent related thread: https://news.ycombinator.com/item?id=21228415 https://news.ycombinator.com/item?id=21228415

> Telegram refused to accept a subpoena Within the sea of stupid that was this endeavour—single-issuer token pretending not to be a security, the wholesale scam that are SAFTs—this really takes the cake.

snagglegaggle 7y ago
I think that's arguable. You're completely within your rights to refuse an unlawful order from a police officer. That it usually would lead to you getting shot reflects poorly on our society, not on the judgement of the person refusing the unlawful order.
- JumpCrisscross 7y ago
  > You're completely within your rights to refuse an unlawful order from a police officer Subpoenas are court-ordered requests for documents. If you disagree with them, you fight them in court.
  - snagglegaggle 7y ago
    Resisting unjust legal action (initiated either by officer or judge) can happen any number of ways, including telling the court to stuff it. Plea deals are the overwhelming number of convictions in the US, something like 90%. Most people do not have access to legal recourse and trusting any US court to operate sanely is a bad idea. Best to avoid it if you can.
    - JumpCrisscross 7y ago
      > Most people do not have access to legal recourse This is a red herring. Telegram have access to lawyers.
      - snagglegaggle 7y ago
        It's not. They have access to lawyers, but can they outspend the SEC or any other agency that wishes to participate? One of the best predictors of whether a lawsuit succeeds is money spent.
        nl 7y ago
        Another good predictor of lawsuit success is what the law says, and in this case it's pretty clear Telegram is in the wrong.
        snagglegaggle 7y ago
        Ehh, no; and frankly, it's like you've not even read my comments at all. If you have please speak to some specific argument they bring up. Otherwise, repeating the opposing argument serves no point. It's almost always about money. On the defensive side, there are enough ways to stall that you can almost always outspend someone to win. On the offensive side, you can spend more time investigating and almost assuredly turn something indictable up. Have you really never heard of this?
        JumpCrisscross 7y ago
        > It's almost always about money As someone who as gone through a fair deal of litigation and arbitration, this is wrong (or at the very least, inapplicable). It’s a common armchair lawyer’s myth. If your opponent has more than $100,000 the tables are fairly even; more than $1 million, totally even. There is a ceiling to court costs, and a finite amount of time before judges issue rulings. (Spending to try and get an outcome predictably pisses off judges.) Getting to a judge costs money; once you’re there, American courts are robust. At an individual level, these thresholds are prohibitive. At a corporate level, they’re not. Exhibit A for you should be the SEC’s win-loss record, even against individuals. (It’s mixed.)
  - patio11 7y ago
    FYI: The SEC can issue an "administrative subpoena" on its own authority, created by Congress. They're only tested in court if you refuse, at which point the SEC (or similar agency) can go to any court of competent jurisdiction. This is not an unusual state of affairs; something like ~300 federal enforcement missions can independently issue subpeonas.
  - celticninja 7y ago
    If the court is in your home territory this may make sense. If, for example,you got a subpoena from a high court in Saudi Arabia, would you respond? Would you even hire a local lawyer? Nope,you would wait until it was filed in a court in your country of operations.
- EpicEng 7y ago
  Which order is unlawful in your mind?
  - snagglegaggle 7y ago
    It is not necessary that I agree, but probably that the Telegram offering is not a security. Sure, "all they had to do was file" but that is a pretty onerous requirement if you think you're not a security, and hugely restricts your market. The Telegram token may increase in price but there's no profit sharing directly from Telegram. It's as if you funded a kickstarter for a limited edition trading card and the company was going to soon start printing more. Nobody is actually commenting on this argument. It just seems like there's a team of people following me around downvoting me.
    - EpicEng 7y ago
      >but that is a pretty onerous requirement if you think you're not a security But the SEC does, so tough luck? >The Telegram token may increase in price but there's no profit sharing directly from Telegram Sounds like a weasely attempt to skirt the rules. Look up the Howey test >The leading case on the definition of an investment contract is the U.S. Supreme Court case, SEC v. W.J. Howey Co. Under the Howey test, an investment contract is “a contract, transaction or scheme whereby a person invests his money in a common enterprise[1] and is led to expect profits solely from the efforts of the promoter or a third party.”
- throw_m239339 7y ago
  How is that subpoena "unlawful"?
paveldurov 7y ago
If you'd like to join our legal team you can reply with your résumé!

mikece 7y ago

So it's not that the blockchain or exchange systems where insecure, only that tokens available at the ICO were being sold below par to investors? Setting aside the giant red flag that is refusing to accept a subpoena, if the ICO tokens are revalued to take away the discount to early investors would it then be legal?

JumpCrisscross 7y ago
> if the ICO tokens are revalued to take away the discount to early investors would it then be legal? No. The tokens are securities. They are issued by a single issuer to fund development of a product which doesn’t presently exist, with early investors in SAFTs buying them on expectation of profit. In any case, how would you value the discount? You don’t know the price until a market exists. And by that point, the 171 early investors have already dumped their pump on retail investors.
- davidgerard 7y ago
  It's worth noting that quite a lot of the VCs in question had already written off their investments in 2017-2018 shitcoin ICOs. This is why said VCs were suggesting to Coinbase last month that they list all these shitcoins that nobody even trades now, but which the VCs just happen to be holding massive bags of: https://blog.coinbase.com/coinbase-continues-to-explore-support-for-new-digital-assets-70419575eac4 https://blog.coinbase.com/coinbase-continues-to-explore-supp...
bagholder-alert 7y ago
You imply that Telegrams “Gram” has any buyers other than the early bagholders.
- throw_m239339 7y ago
  Is it the same stunt as Bitfinex and LEO backed by USDT "backed" by dollars? How is the lawsuit working for NY attorney General by the way? These guy just feel untouchable… it's unbelievable what they can get away with…

jorvi 7y ago

> The Telegram Open Network is probably dead. The emergency order stops Telegram from “delivering Grams to any persons, or taking any other steps to effect any unregistered offer or sale of Grams.” This is worldwide — not just for the US. This completely blows my mind. How does the SEC have any power in telling a hypothetical European situated in Europe if they can or can't buy Gram from European sellers..?

SpicyLemonZest 7y ago
That's how it generally works. If you're subject to a court's jurisdiction, and the court orders you not to do something, you can't dodge the order by just doing it in some place where the court doesn't have jurisdiction.
- jorvi 7y ago
  But that is not how it generally works. If Unilever gets told by a UK court they can't sell peanut butter because that court doesn't like peanut butter, it doesn't mean Unilever is suddenly forbidden from selling peanut butter in the USA. Edit: to clear up the analogy - UK courts don't have a say over what Unilever can and can't sell in USA jurisdiction. Likewise, the SEC can (should?) only regulate trade within USA jurisdiction or by USA entities. If Telegram wants to sell Grams on the UK market, Telegram should be able to tell the SEC to go pound sand, as any USA court orders don't mean jack outside that jurisdiction
  - shakna 7y ago
    > Edit: to clear up the analogy - UK courts don't have a say over what Unilever can and can't sell in USA jurisdiction. And the SEC is dealing with what is being sold in the US. > committed to flood the U.S. capital markets with billions of Grams by October 31, 2019 > sold more than 1 billion Grams to 39 U.S. Purchasers, raising $424.5 million from the U.S. market
    - jorvi 7y ago
      And the article says > This is worldwide — not just for the US I even quoted that in my parent comment.

chubs 7y ago

I don't understand why the SEC (america) has jurisdiction to 'block' Telegram's operations (legal domicile in London) - am I missing something here?

deleted 7y ago
[deleted]
JumpCrisscross 7y ago
> I don't understand why the SEC (america) has jurisdiction to 'block' Telegram's operations (legal domicile in London) Because Telegram “committed to flood the U.S. capital markets with billions of Grams by October 31, 2019” and “sold more than 1 billion Grams to 39 U.S. Purchasers, raising $424.5 million from the U.S. market” [1]. [1] https://www.sec.gov/litigation/complaints/2019/comp-pr2019-212.pdf https://www.sec.gov/litigation/complaints/2019/comp-pr2019-2...
detaro 7y ago
They're active in the US, selling to US investors, ...

seibelj 7y ago

Alternative: telegram launches anyway, and the SEC does... what exactly? Bans them from being traded on US exchanges? It would be impossible to stop the software, just as they can’t stop bitcoin.

JumpCrisscross 7y ago
> telegram launches anyway, and the SEC does... what exactly? Refers Telegram to the DoJ for criminal prosecution, which results in bank accounts being frozen, any SAFT holders (or anyone else) who sold their Grams being on the hook to the buyers, and the seizure of Telegram’s assets in America and anywhere else with a mutual prosecution treaty, which covers much of the EU. At the point of wilfully defying a court order to sell securities, it becomes fraud and potentially money laundering.
- seibelj 7y ago
  But these are foreign corporations? I think I’m confused about how Russians, with offshore corporations, and foreign bank accounts, can suddenly be banhammered by the SEC...
  - davidgerard 7y ago
    Where are the two corporations that substantially control your app being on phones located?
    - seibelj 7y ago
      Ok so the SEC order really has teeth because they can use it to pressure Apple and google to remove telegram from their app stores? That’s a significantly less impressive penalty than what Internet lawyers have been telling me.
      - nl 7y ago
        There's a few other obvious things: They can sanction individual directors (ban them from holding office in any US corporation) They can freeze any US assets They can ban any US companies transacting with them

schmichael 7y ago

With each new cryptocurrency drama due to flouting AML/KYC regulations, flouting securities regulations, collapsing/exit-scamming exchanges, murders, drugs, sex trafficking, let's not forget: PoW is an ecologically irresponsible algorithm.[1] Altogether cryptocurrency is such a terrifyingly irresponsible ecosystem, I'm surprised anyone wants to be involved in it. [1] https://www.sciencedirect.com/science/article/pii/S2214629619302701 https://www.sciencedirect.com/science/article/pii/S221462961...

ajconway 7y ago
This one is PoS though.
- schmichael 7y ago
  Supposedly, AFAIK it's vaporware and may never be released. Even if it is functional PoS (which sounds like a codified plutocracy, but I could be wrong), they still managed to botch securities regulations. Even if they sneak past that somehow, it seems likely they'll also fall afoul of AML/KYC regulations. Maybe not! Maybe they're finally the ones who will do it all! Legal and ecologically responsible! If so they're off to a very bad start.
  - zzzcpan 7y ago
    Do fully legal cryptocurrencies even make sense? They have to be legal only to sneak past regulations and gain adoption, but still somehow escape government control, so that AML, etc. cannot be enforced.
austhrow743 7y ago
Isn't all that the stuff that makes crypto exciting? Its the wild west come again. A new frontier. Appeals to the desire to expose oneself to risks for profit. To do something that maybe you shouldn't. To operate outside of the soft, protected existence of mainstream first world society. Bowl without the bumper bars. Absent that emotional fulfilment its just boring old money.

aey 7y ago

SEC is blocking their launch. On the face of it, telegram has been complient with the SEC up to now and have filed exemptions for their sale. https://www.sec.gov/Archives/edgar/data/1729650/000095017218000060/xslFormDX01/primary_doc.xml https://www.sec.gov/Archives/edgar/data/1729650/000095017218... On their own discounts are not illegal. I think what’s obvious is that the network is not truly decentralized and depends on telegram and investors expect to profit from telegrams work on the network. So they should probably file an s-1 and follow the blockstack route. What would have been ironic, is if TON was truly decentralized and independent of telegram than the network would have been launched anyways.

snagglegaggle 7y ago
>I think what’s obvious is that the network is not truly decentralized and depends on telegram and investors expect to profit from telegrams work on the network. This matches exactly the concept of collectible items. In fact, there's a blockchain based TCG: https://godsunchained.com/ https://godsunchained.com/. Is the point of the card packs not in large part speculation? One card apparently went for ~$60k, and there is a discount being offered for early buy-in.
- aey 7y ago
  Eh, magic cards have independent value from the company, and MtG sells them at a fixed price to consumers. If you want a decentralized TON, get all the investors together and launch a genesis block with the open source code. That’s basically what EOS did.
noxer 7y ago
Read their paper, they stated form the beginning that TON isn't able to launch decentralized. The initial investment to run a node is to high so they can't just put some binary on the net and ask people to run it. They planed to run every node in the beginning to show that it works and then everyone can join (with no control over who joins) but to join you have to have GRAMs so by stooping them to distribute grams they basically made it impossible to decentralized. Although they could still give out GRAMs, start the network and just ignore the SEC. Technically the network would decentralize over time but for that to happen there must be a market for GRAMs. Who's gonna obtain "illegal" GAMS to run a node and get paid with "illegal" GRAMs which can only be sold "illegal" again. And even people would do the services on TON are meant to be used by the masses if they can't simply buy GRAMs the whole thing can't fuel itself.

aakilfernandes 7y ago

The author of this article is turning inches into miles. SAFTs aren't dead. The SEC is alleging Telegram has failed to deliver the promises it has made, so the SEC is pre-emptively stating they need to halt delivery. Presumably, once they complete their promises they'll be able to deliver Grams. From the SEC Complaint: The Whitepaper spoke of potential future products and services that investors could use in connection with Grams, but also made clear that these products were not available at the time the Offering began and would not be available by the time Defendants delivered Grams to Initial Purchasers. Telegram, however, does seem to be in a pickle regarding the PoS consensus model. The SEC seems to be alleging that in order for the network to be sufficiently decentralized, having only qualified investors staking is not enough. Also from the SEC complaint: Defendants knew, however, that to actually implement the TON Blockchain in the real world, the project would require “numerosity”: a widespread distribution and use of Grams across the globe. Indeed, by definition, the TON Blockchain can only become truly decentralized (as contemplated and promoted in the Offering Documents) if Grams holders other than the original Grams purchasers actually stake Grams and, thereby, act as “validators” of transactions on the TON Blockchain. Stated differently, if the original Grams purchasers alone all immediately staked their holdings, the TON Blockchain would be centralized rather than decentralized and, therefore, subject to misuse and majority attacks. This fundamental need for additional Grams holders demonstrates that the TON Blockchain was designed from inception to require the Initial Purchasers to immediately distribute their holdings to the public.

H8crilA 7y ago
Indeed what they want is an S-1 or an F-1 form filling. A security registration. That's it. The SEC has no opinion on the offering other than they think it's a security (this claim itself could also be challenged), and as such has to be registered under the 1933 act.
- cwyers 7y ago
  What are the odds that Telegram, despite believing they didn't need to do an S-1 or F-1 form filing, complied with the letter of everything that the form filing is intended to determine? They would likely have to materially change the offering so that the form filing didn't invite another action.

znpy 7y ago

Meh, it looks like the US wants to have a say in what people in other countries are doing, again.

ryanlol 7y ago
This is about the US wanting to have a say in what those people do in the US.

stevespang 7y ago

Listing Grams on exchanges — to skin the retail suckers . . . which essentially is just what is done with IPO's in the stock market, quite legally and unethically, big institutions buy, they pump it up, then dump it on the retail suckers at the height, then the bottom falls out.

teslaberry 7y ago

i was there when telegram presales were happening in backchannel investors trying to flip tokens on one another. if you don't know you're the sucker, then you're a fish that got stuck with tokens. the sec isn't protecting older investors, cause they will never get their money back. tokens of all sorts remain a method to scam people out of btc, which only even works because btc itself is a rising bubble. imagine an economy based on trading facebook shares. but imagine if facebook shares didn't rebound from 19 but went to 50 cents. well, right now the entire cryptocurrency economy is still banking on bitcoin NOT going back to 1000 dollars. good luck on that one. if bitcoin doesn't go to 100,000 dollars, no one who invested in telegram will ever make a profit if they are still waiting to exit like the sucker that they are.

octomatic 7y ago

https://cointelegraph.com/news/telegram-responds-to-investors-on-sec-action-hearing-set-for-oct-24 https://cointelegraph.com/news/telegram-responds-to-investor...