SEC Depositions Shed Light on Telegram's $1.7B Token Sale

Telegram CEO Pavel Durov pushed back against a U.S. Securities and Exchange Commission attorney's speculation that his company's 2018 token sale was meant to refill its cash reserves.

During an 18-hour deposition, Durov disputed in particular SEC attorney Jorge Tenreiro's claim that the sale would help Telegram pay for servers.

Acсording to Durov, from the beginning he has been funding Telegram with proceeds from the sale of his earlier creation, popular Russian social network Vkontakte, or VK.com.

The newly released transcripts of the SEC's depositions of Durov, Telegram Vice President Ilia Perekopsky and financial services specialist Shyam Parekh offer a rare window into the logic and the mechanics behind the $1.7 billion token sale.

Asked why Telegram didn't opt for equity fundraising, which Durov contemplated at some point before the token sale, he said: "Because we were concerned that selling equity could affect the company's integrity and its values, and change the company's ethos and what it stands for."

The SEC sued Telegram in October, accusing the company of selling unregistered securities and ordering it to halt the launch of TON. The first hearing for the case is scheduled Feb. 18 in the U.S. District Court of the Southern District Of New York.

According to Durov's deposition, Telegram has reached about 300 million monthly active users, with the large user base acting as TON's main selling point at the time of the billion token sale.

As the court process with the SEC approaches the first hearing in February, Telegram recently announced that a wallet app for the future gram tokens will not be built into the messaging app at the time of the launch.

Telegram did not make efforts to make sure investors in the token sale would be the blockchain's validators as well, but there was interest from a number of investors in doing so, Durov said.

The entity is mentioned in the deposition multiple times as the SEC alleged Telegram was helping the secondary market of grams thrive, which, in the agency's reasoning, supported the idea that grams were securities.