What should Telegram do next? Investors interpret SEC documents

Original author: Avichal Garg, co-founder of Electric Capital, the serial entrepreneur, former Facebook and Google employees

Source: block rhythm

BlockBeats news, Electric Capital partner Avichal Garg today interpret the SEC's filing of Telegram's documents on Twitter, and released 15 Twitter posts in succession, leaving many foggy investments that have been sued for Telegram TON until now. The people quickly learned about the status quo.

The block rhythm BlockBeats-HQ translated these Twitters, please continue to check:

1. I read the SEC's documentation on Telegram. I don't think most of the current interpretations on the market have caught the key to this document.

The focus of this document is that the SEC believes that GRAMs should be considered securities because Telegram controls TON and the funds raised by its communications software, Messenger.

The following is my interpretation of the SEC's documentation on Telegram (but I am not a lawyer).

2. The SEC is consistent with previous practices, with the focus again on the Howey test:

A/ Investing in US dollars B/ In a common company C / Expecting profit D / Based on others' efforts

A condition is obviously satisfied, C condition is that VCs want profit, the key point is B condition – common enterprise, and D condition – based on the efforts of others, whether these two conditions are satisfied.

3. See how they repeatedly claim that Telegram and Durovs are in control of everything, so the SEC believes that this is a joint venture driven by the efforts of other managers.

For example: "Pavel and Nikolai Durov will be, or are already the only members of the TON Foundation's board of directors" and so on.

Avichal Garg's tweet, the content of the SEC file is Article 3: "The reason why Grams is considered a security is that the initial purchaser of the token and subsequent investors want to profit from the operation of Telegram."

4. More: "It's all about Telegram's ability to develop and launch networks."

And they have repeatedly stated that Telegram Inc benefits directly from this financing:

"It is estimated that between 2019 and 2021, only the cost of the Messenger will reach 520 million US dollars" (the document is described in various ways)

Avichal Garg's tweet, the content of the SEC file is Article 42: "The point is that this contractual deadline does not have any commitment or assurance that Grams will actually be used to purchase goods and services, just for Telegram development. And the ability to go online with the TON blockchain network."

Avichal Garg's tweet, the content of the SEC file is Article 51: "According to Telegram's promotional materials and behavior, Grams buyers will consider their investment to be in common interest with other Grams buyers, and their investment is also The defendant enjoyed a common interest in the profits brought by the success of Grams."

In the tweet, Avichal Garg's SEC file is marked as Article 53: "The reason why Grams is not a currency is that they are not currently used as actual currency." Article 54: "The number of Grams sold and distributed by Telegram far exceeds the amount of Grams required for the TON network."

In the tweet, Avichal Garg's SEC file is marked as Article 55: “In fact, the defendant stated in the submitted document that the funds raised will be used for the development of the Messenger and TON networks. It is expected that Telegram will only be in 19 years. In 21 years, one-third of the proceeds will be spent, or $520 million on Messenger."

5. “The defendant will use the funds raised for the business operated by the defendant”

"Telegram claims that the remaining Grams will be left to its development team."

"Telegram intends to "use revenue" to continue developing Telegram Messenger. "

In the tweet, Avichal Garg's SEC file contains the content of Article 56: “The defendant spent approximately $218 million of the $1.7 billion raised funds on the development of the Messenger and TON networks. Telegram has full discretion over how funds are used. right".

Avichal Garg's tweet, the content of the SEC file is Article 57: "Telegram emphasizes to investors that Telegram, Messenger and Durovs are indispensable for the TON blockchain project and Grams."

Avichal Garg's tweet, the content of the SEC file is Article 62: "Telegram makes the buyer expect that the defendant will use the proceeds to fund the defendant's business, and the defendant and the founders of Telegram will be committed to the company's development because They all hold Grams, and because of the indistinguishable relationship between Grams and Messenger." The content of the annotated SEC file is Article 63: “Telegram launched token sales in the first quarter of 2018, and Telegram will sell 44% of the 5 billion Grams for this purpose. Telegram claims that the remaining Grams will belong to it. development team".

Avichal Garg's tweet, the content of the SEC file is Article 64: "The Primer's 17-year release describes that for the funding needs of Messenger, $620 million is needed for endogenous growth. In the 18-year Primer, there are also A similar explanation, Telegram plans to use the funds raised for the subsequent development, maintenance, and overall operational needs of Telegram Messenger."

6. And more, "This is also investing in Messenger at the same time."

"Telegram's financial interests will be consistent with investors"

"With the integration of Telegram's application, TON Wallet will be the world's most widely used cryptocurrency wallet."

Avichal Garg's tweet, the content of the SEC file is Article 66: "The Offerings Documents clearly state the purpose of the release… The issuance of funds is for investing in Messenger…. .. and related features in Telegram Messenger development." The content of the annotated SEC document is Article 66: “Telegram's financial interests are consistent with investors. IOI further links the success of Messenger to the TON blockchain network and states that after integration with Telegram's application, TON Wallet will become The world's most used cryptocurrency wallet."

In the tweet, Avichal Garg's SEC file is marked with Article 69: "Telegram also guides potential investors to understand that Messenger will act as a Telegram, enabling Telegram's clients and agents to achieve the success of the entire company."

The content of the SEC document marked is Article 70: "Telegram claims that it will hire experts to develop TON, and tout Durovs as a company with a market capitalization of tens of millions and millions of users, with more than 20 years of experience, and Telegram has a team of top talent."

In the tweet, Avichal Garg's SEC file is marked as Article 72: "At the same time, the white paper includes a detailed list of projects and claims that Telegram and its principals will implement the TON network online. Telegram has no good reason to Grams is completed before distribution."

Avichal Garg's tweet, the content of the SEC file is Article 74: "The Telegram founder will be responsible for the effective use of funds raised through any (subsequent) token sales."

The contents of the annotated SEC file are Article 75: "Telegram will continue to operate on the new TON blockchain network for several years after the Grams distribution is completed, and will maintain its key position for the foreseeable future."

7. And more! "As evidenced by the Offering Documents, Telegram is involved in a coordinated, centralized effort to realize Durov's vision of creating a new, scalable blockchain network."

"Durovs is the sole director of Telegram and Telegram will have full power over all activities of the TON Foundation."

Avichal Garg in the tweet, the content of the SEC file marked is Article 98: "TON "Ecosystem" did not exist in the past and does not exist now. Until now, there have been no products and services that can be purchased using Grams. The functionality of TON, as determined by Telegram, is currently (and will continue to be) completely independent of all funds provided by investors. At the same time, from the perspective of investors, the client has reason to expect to make a profit through the resale of Grams."

In the tweet, Avichal Garg's SEC file is marked as Article 104: "As evidenced by the Offering Documents, Telegram is involved in a coordinated, centralized work to achieve Durov's creation of a new The vision of a scalable blockchain network. By definition, as long as the Grams holder (rather than the original Grams purchaser) actually pledges Grams, the TON blockchain network does achieve true decentralization (just like As stated in the distribution document).

Avichal Garg's tweet, the content of the SEC file is Article 109: "The defendant is and has established the TON Foundation. Because the sole director of the TON Foundation is Durovs, Telegram has full control over all activities of the TON Foundation. "."

Avichal Garg's tweet, the content of the SEC file is Article 116: "The original purchase of Grams, and the subsequent purchase of Grams, are and will be an investment in a joint venture with capital, with expectations for profit. The purchases are primarily driven by the defendant's current and future business and management practices, as well as by the TON Foundation created by their agents, and driven by the demand for Grams. Therefore, Telegram issues and sells Grams to the original purchaser. Any subsequent issuance and sale, as well as the distribution of Grams, will and will be the issuance and sale of securities."

8. The SEC believes that Telegram is actually raising money for Telegram Messenger, Telegram controls the TON Foundation, and the only Telegram employee who develops the TON network.

Therefore, it is a common enterprise, and its profits are brought about by the efforts of others.

9. In my opinion, the SEC's approach is quite consistent.

For the same reason, ETH is not a security (because Ethereum is enough to centralize, so there is no common enterprise), and GRAMs are securities (Telegram is a clear common enterprise with a clear manager who drives the value of GRAM)

10. This is not the end of SAFT. They barely mentioned SAFT. They have been focusing on the Howey Test without considering SAFT, ICO or other mechanisms.

If you think that tokens are like pre-sale airline miles to make an airline develop, then your fight against the SEC does not exist.

11. There is a big problem, how to launch a project that uses SAFT or other means of financing, so that the project can achieve “sufficient decentralization” through token generation in development teams, verifiers, token distribution, etc.

This is obviously not easy, and I am not a lawyer (IANAL), but I am very optimistic about this.

12. The SEC emphasizes that other projects in the future will be avoided as much as possible: A/ companies and foundations are controlled by the same person B/using funds to finance existing companies C/ only company employees submit codes

13. Other projects should: D/ Let others outside the entity that raises funds develop apps on the chain E/ Use cases at startup, so there is practicality, not future utility F/ Avoiding investors Commitment to return G / avoid contact with the exchange

14. Obviously this is not any form of legal advice.

Imagine being able to avoid all the problems of the SEC on Telegram. This idea is not unrealistic. The SEC still claims that the token is a kind of security, because the Howe test is likely to prove that there is a common enterprise and the efforts of others.

15. Read the full file. It is short and very good to read.


If there is something unclear, I am not a lawyer. This is not a suggestion for anyone.

For professional lawyers, if I have any misunderstanding, please correct it.