Tech 30 April 2020

Investors in Durov’s TON in dark as deadline approaches

There is only a week until the promised launch date for tech billionaire Pavel Durov’s TON blockchain platform. Durov pledged investors would get their money back if the platform was not up-and-running by April 30. The delay has largely been the result of a legal attempt by the Securities and Exchange Commission (SEC) to block the launch of Durov’s cryptocurrency Gram, part of the TON project. Investors in TON have no idea what Durov is planning, and several have already said they want their money back. 

  • Durov’s messaging app company Telegram was planning to launch TON on April 30. It was for this purpose that Durov raised $1.7 billion in early 2018 from investors, including Silicon Valley funds like Kleiner Perkins and Sequoia. After the SEC filed its lawsuit against Telegram, disputing the legal classification of Gram tokens, Durov’s team offered investors two options: immediately collect 77 percent of their money (around $1.3 billion) or wait another 6 months for the launch. It was expected that the final U.S. court verdict would be known by now. 
  • But events have complicated the process: the court issued an interim ruling in favor of the SEC that preliminarily banned Gram, and Telegram immediately filed an appeal. Now, the court must consider the appeal. The SEC has time until mid-May just to present its objections, explained (Rus) Yevgeny Krasnov, a New York State lawyer and head of Buzko Legal’s international dispute practice. 
  • Telegram has not communicated with investors since last year, five sources told The Bell. “I have given up and will wait for whatever comes,” admitted (Rus) one. “Several of my colleagues have already written off their investments as losses,” another said. “I decided to wait. But one investor I know wants his money back because he changed rubles into dollars to make the investment and with today’s exchange rate even 70 percent back would be a good result,” a third source explained. 
  • One of the most likely outcomes is that Telegram will give investors a similar option to the one it offered previously: wait and see how the court case with the SEC plays out, or get some of your money returned now. 
  • In October, Telegram said it was prepared (Rus) to return $1.3 billion to investors. But this sum is now likely to be less: Telegram has been surviving for the past three years on the money the TON team raised in two offerings. Court documents show that, between January 2018 and January 2020, the company spent (Rus) $405 million of the $1.7 billion it has raised. Total expenditures are now significantly higher.  
  • The big question is what Durov will do if investors don’t want to wait. On its own, Telegram is not making money. “I think there will be people prepared to invest in the messaging app, but, in order for this to happen, the app would have to start making money,” one investor said. Another source told The Bell he thought Telegram might sell some shares. 

Why the world should care TON was one of the most ambitious Russian tech projects of recent years. Investor interest was huge, and there were many who didn’t get a slot in the initial offering. But its fate now hangs in the balance, with everything resting on the outcome of the SEC case. The court’s decision will be a landmark moment for cryptocurrency projects across the world.