Telegram CEO Pavel Durov pushed again in opposition to a U.S. Securities and Change Fee (SEC) lawyer’s hypothesis that his firm’s 2018 token sale w
Telegram CEO Pavel Durov pushed again in opposition to a U.S. Securities and Change Fee (SEC) lawyer’s hypothesis that his firm’s 2018 token sale was meant to refill its money reserves.
Throughout an 18-hour deposition, Durov disputed specifically SEC lawyer Jorge Tenreiro’s declare that the sale would assist Telegram to pay for servers. This declare is a core a part of the SEC’s argument within the ongoing case that Telegram was promoting unregistered securities.
Acсording to Durov, from the start, he has been funding Telegram with proceeds from the sale of his earlier creation, well-liked Russian social community Vkontakte, or VK.com.
“Sometimes I would not separate my private financial savings from the wants of Telegram Messenger,” Durov mentioned, in keeping with a transcript of the Jan. 7-Eight deposition. “If I see that Telegram wants extra assets, I’d fortunately make investments extra as a result of I am an individual that prefers to not personal any actual property.”
The newly launched transcripts of the SEC’s depositions of Durov, Telegram vice chairman Ilia Perekopsky and monetary providers specialist Shyam Parekh provide a uncommon window into the logic and the mechanics behind the $1.7 billion token sale.
Somewhat than fundraising for the corporate, promoting the tokens often called grams to traders was a means to ensure sufficient of them are staked to safe the proof-of stake TON blockchain, Durov claimed.
“And solely after that, realizing that we now have entry to sure funds and on the similar time we’re restricted in our capability to pursue different potential income streams, as a consequence of the truth that we’re busy constructing TON Blockchain, we determined that we may use a few of the funds for a few of the functions that I described,” he mentioned, referencing the bills of the Telegram messaging app.
Requested why Telegram didn’t go for fairness fundraising, which Durov contemplated in some unspecified time in the future earlier than the token sale, he mentioned: “As a result of we had been involved that promoting fairness may have an effect on the corporate’s integrity and its values, and alter the corporate’s ethos and what it stands for.”
Very important indicators
The SEC sued Telegram in October, accusing the corporate of promoting unregistered securities and ordering it to halt the launch of TON. The primary listening to for the case is scheduled Feb. 18 within the U.S. District Court docket of the Southern District Of New York. Earlier this week, the Chamber of Digital Commerce and the Blockchain Association filed friend-of-the-court briefs to the courtroom in assist of Telegram.
In keeping with Durov’s deposition, Telegram has reached about 300 million month-to-month energetic customers, with the massive person base appearing as TON’s most important promoting level on the time of the billion token sale.
Nevertheless, because the courtroom course of with the SEC approaches the primary listening to in February, Telegram just lately announced {that a} pockets app for the long run gram tokens won’t be constructed into the messaging app on the time of the launch. It didn’t rule out, nevertheless, that the pockets can be part of the messenger in some unspecified time in the future sooner or later.
Between 25 and 30 workers are engaged on the startup’s core group, juggling between coding for TON and supporting the messenger app, Durov mentioned.
One other a part of the SEC’s argument is that traders in TON solely purchased grams to promote them for revenue, as they’d do with regular securities, and to not use them on the TON blockchain, for instance, to stake them and change into validators of the proof-of stake community.
Telegram didn’t make efforts to ensure traders within the token sale could be the blockchain’s validators as nicely, however there was curiosity from a lot of traders in doing so, Durov mentioned.
“I feel we obtained curiosity from – nicely, at the least a number of validators – potential validators, it could be a dozen, and we had been actively, you already know, processing such inquiries and requests for validation in early October when this course of was interrupted by this began litigation,” he mentioned.
Perekopsky additionally said that many traders had been asking about validation. “Particularly the nearer to the launch we obtained, the extra questions had been about that, they usually had been sending emails asking in Telegram, calling, asking in conferences,” he mentioned.
Investor gatekeeping
The SEC additionally argues that Telegram didn’t report its fundraising correctly as whereas the corporate filed for an exemption from registration underneath Regulation D in February and March 2018, funds kept coming Telegram’s means after the filings’ dates.
Durov, Perekopsky and Parekh of their depositions mentioned {that a} important a part of the $1.7 billion got here after the sale rounds had been formally over, however defined that the acquisition agreements for all these funds had been already signed on the time of submitting and it simply took some traders extra time to wire the funds.
In keeping with Parekh, each the primary and second spherical of the token sale was oversubscribed, particularly the primary, February 2018 pre-sale spherical when the variety of traders exceeded the $850 goal sum three to 4 instances.
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