Telegram will fail to launch its Gram cryptocurrency in time and investors will demand their money back, believe Kommersant’s interlocutors. Earlier, the Federal Court of the Southern District of New York sided with the Securities and Exchange Commission (SEC), recognizing Gram as a security and prohibiting its issue and transfer to investors.
At the same time, it became known that Telegram spent $405 million from 2018 to 2020 on the development of the messenger and blockchain platform, which is about 24% of the raised funds. According to Alexei Kiriyenko, CEO of Exante and one of Telegram Open Network’s investors, the company’s lawyers have virtually no chance, and it will have to return the spent funds. At the same time, he believes that Telegram founder Pavel Durov will try to find new ways to launch the cryptocurrency.
Another source of the newspaper, who wished to remain anonymous, is more pessimistic. He believes that the company has three options: to transfer the cryptocurrency to investors bypassing the court decision, return a pre-determined amount of 72% of the total investment (or $1.7 billion), or again delay the launch of the Gram platform. Many of the investors are just inclined to take the funds – the decision to recognize Gram as a security will give them a reason to go to court and demand their money in full, says Kommersant’s source.
The recognition of Gram tokens as securities and the ban on their transfer is just one step in the litigation, says A-PRO attorney Yuli Rovinsky. It’s a "wake-up call" for Durov – the court pointed out that the Commission has provided very convincing evidence that Telegram is allegedly selling unregistered securities under the guise of tokens. The platform could finally start operating if the company’s appeal is granted – in which case it would be possible, among other things, to recover court costs from the SEC. However, if the court approves the ruling, the project is not destined to become a reality, says Ekaterina Orlova, head of the legal practice of Grace Consulting Ltd. At the same time, she notes, investors can demand their money regardless of the decision on appeal, since the deadline for the execution of contracts for the primary acquisition of Gram was set for October 2019.
According to documents published during the case, among the investors of the blockchain platform are the founder of Wimm-Bill-Dann, David Yakobashvili, who invested about $60 million, the main owner of the Safmar Group, Mikhail Gutseriev ($15 million) and the former minister for open government, Mikhail Abyzov, who is in the jail ($10 million). Besides them, Qiwi founder Sergei Solonin and businessman Roman Abramovich were also named as investors.
The Securities and Exchange Commission suspended the issuance of Gram digital tokens in October 2019. The SEC argues that they should be considered securities and the relevant U.S. law should be applied to them. Telegram considers the Commission’s position absurd. The SEC accused Durov that Telegram and TON sold 2.9 billion digital tokens between January and March 2018 to 171 customers worldwide, including over 1 billion tokens to 39 U.S. residents. This generated $1.7 billion in revenue, including $424.5 million "in the U.S. market." It was alleged that by launching Gram, the company was trying to avoid U.S. federal securities laws by simply labeling its product a cryptocurrency or digital token, despite fully meeting the definition of a "security."
On March 24, the Federal Court for the Southern District of New York agreed with the SEC’s claims, recognizing Gram tokens as a security. In that case, their transfer to pre-IPO buyers, which took place in early 2018, was deemed illegal. The Commission itself, however, found the court’s ruling fair, noting that the SEC’s emergency action was primarily aimed at "preventing a flood of digital tokens that were sold in violation of the law from flooding the U.S. markets, " said Stephanie Avakian, co-director of the Securities and Exchange Commission’s Division of Enforcement.