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The $1,5 Billion Comeback of the Telegram GRAM Crypto, Bypassing the SEC and the US.

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It’s almost impossible not to respect or like Pavel Durov. He founded VK, Russia’s largest social network. After standing up to the Russian government for users privacy, he was forced to sell his stake for peanuts, under the threat of a jail sentence on fabricated charges. He left Russia and went on to create Telegram, one of the most used messenger apps globally, with over 400 million users. In 2018 he raised $1,7 Billion in a private GRAM token sale to 171 super-wealthy accredited investors. But the SEC killed the GRAM project and forced a refund of the raised funds. In this oped, I will shed some light on why it happened and what’s next?

If you think that Pavel Durov gave up on his dream of launching a crypto-currency just because the SEC killed the GRAM crypto. Think again. Just like any startup founder, he is clearly learning from mistakes and iterating looking for the perfect product-market-fit.

There can only be one reason for blocking US citizens and the dollar from its current round, and that’s a second try at launching the GRAM currency.

Telegram now has more than 400 million users, mostly outside of the US, and it just raised $1,5 Billion in a non-equity round.

The GRAM token sale was not your typical Initial Coin Offering. Unlike all the others, including Ethereum, Ripple, and EOS, it wasn’t open to the public. It was a fully private affair only accessible to the ultra-wealthy. The minimum investment was $10 million, but most of the happy few invested a multiple of that.

There were reportedly only 171 investors who invested a total of $1,7 Billion.

Pavel Durov, the founder of Telegram, made 5 catastrophic mistakes.

  • The first, and most fatal mistake, was allowing US citizens to invest.
  • The second mistake was allowing the US dollar as a currency for investment transactions.
  • The third mistake was to think that the US SEC was a fair, independent, and not a corrupt institution.
  • The fourth mistake was to use the raised capital to finance Telegram’s operational costs, not giving US investors a share of Telegram itself. At least that’s what the SEC accused Telegram of.
  • And finally, he probably thought that by being against the Russian Putin government, he would get a free pass from the US.

These 5 decisions combined, proved fatal, as they gave the US SEC all the tools it needed to kill GRAM before it even launched.

The problem was no so much with the ICO itself, but with the potential threat to the status quo of the US dollar-centric financial system. At the time Telegram had close to 300 million users, of which the majority outside of the US. It was also the messenger of choice for the crypto-community via its channels and groups.

By leveraging the existing Telegram user-base the GRAM crypto could become a real currency for micro-payments for over 300 million people. This must have been quite a nightmare scenario for anyone who wanted to keep the status quo of the US dollar as a global reserve currency.

The US could not give this power to a Russian immigrant, even someone as anti-Putin as Pavel Durov.

  • Pavel Durov was too independent of the US. At the time he was living in Dubai, not in New York or Silicon Valley like for example the founders of EOS.
  • Facebook wasn’t ready to deploy its own Libra cryptocurrency and successfully lobbied against Telegram.
  • The US shareholder class wasn’t allowed to get equity in the Telegram company. This is usually ignored, but it is one of the main reasons for the initial SEC attack.
  • Telegram’s userbase could catapult GRAM into becoming the most used cryptocurrency globally outpacing bitcoin, Ethereum, and any other altcoin.

The SEC has unrivaled powers in the Western economy only if the US dollar is used and if US citizens have invested. It didn’t matter that Telegram never has, business in the US, the US SEC could still enforce its laws and regulations on Telegrams operations outside of the US.

In stark contrast to GRAM, EOS was allowed to raise a multiple of GRAM publicly over a period of 12 months, starting in 2017, ignoring all laws and regulations. EOS was only fined 50 million USD, which is peanuts compared to the 4 Billion USD it raised.

But unlike GRAM:

  • EOS from day one looked a lot like a Ponzi-scheme. Even the ‘dutch’ auction-inspired fundraising model was engineered to fictitiously increase the price of EOS month on month.
  • EOS had no users or products when it started raising capital.
  • EOS had no existing technology, and the raised capital was used to build the technology. That was no secret.
  • The beneficiaries of the investment round were mostly US citizens. The $4 Billion went to Cayman company, but it was controlled by US citizens.
  • The shareholder class was allowed to enter the Block One company, the issuer of the EOS tokens. Peter Thiel was amongst the investors in the parent company.

2 years later, no one even talks about EOS. The founders and investors of Block One, the issuer of the EOS tokens made a huge profit.

Bloomberg reported that investors like Peter Thiel made a 6,567% return on their investment in Block One.

Everyone else, especially the public and retail investors, who bought the EOS tokens, lost out.

Maybe they’re building something cool and disruptive in total secrecy. Who knows. But that seems doubtful because even though they raised over 4 Billion USD they are not hiring. That seems a red flag. I may be wrong.

When I look at the EOS case, and compare it to GRAM, I can’t help but feel that the SEC doesn’t really care about the public or retail investors. It clearly has different priorities and is more interested in protecting the 1% and the status quo.

Just like Telegram, Facebook has a huge user-base. If only 1% of its users use the Facebook Libra crypto, it would not just threaten, but destroy the US-dollar legacy financial system globally. It would make Facebook the largest financial system overnight. I always found it weird that VISA and Mastercard were partners in Libra because crypto makes these two players absolutely irrelevant. So it wasn’t a surprise when they abruptly left the Libra project.

The supremacy of the dollar as a reserve currency is what gives the US global power. It can wield this power to destroy individuals, corporations, and even countries, as it did with Venezuela, Iran, and North Korea. As long as the US dollar is the global reserve currency, the US can print as many dollars as it wants, to finance its own economy and military.

Keeping the US dollar the global reserve currency is vital for US national security.

But even though Facebook is more powerful than many governments, it is still not as powerful as the FED, the private ‘organization’, which prints the US dollar.

The US dollar is not just a currency, it is a weapon of mass destruction.

Unlike Libra, Gram, Ethereum, or Ripple, there is no central company, organization, or group of people which can be attacked by the SEC. There is no point to attack and the miners are anonymous and decentralized. Even the founder is unknown to this day. He or she may be dead. Or not. No one really knows. That is why it is almost impossible to destroy Bitcoin.

Governments can only attack bitcoin holders since they can get their identities via exhanges. But that is a lot harder and less efficient.

  • Although many retail and even institutional investors get into bitcoin, you can’t really use it as a reserve currency. It’s still highly speculative. The price can double or triple, but it can also go down by 90%. It’s not linked to the real economy in any way. Not really good if you want to protect your capital.
  • Bitcoin is not practical if you want to use it as a replacement for micro-payments. It’s too slow and too complicated for the masses. That’s why it’s not ideal as a currency.
  • In order to use Bitcoin in the real economy, you still need to convert it to fiat, and there you still need to go through extensive KYC and AML, making it even less attractive.

Yes, it is. But corruption in the US is more refined.

If you think of corruption, you probably think of money being exchanged in envelopes or suitcases between a bureaucrat and some maffia-boss. But that’s not how it goes down in US politics and US institutions.

After working some time at the US regulators some bureaucrats are offered overpaid positions at corporations they regulated. Others are offered overpaid lectures, overpaid book deals, and so on. That’s corruption 2.0.

The notion that the SEC is fair, independent, and free from corruption is an illusion. Just like House of Cards is closer to a documentary than fiction, you may understand how the SEC works more by watching ‘the Billionaire’ on Netflix.

Covid19 has put enormous stress on Western economies. The trade war between the US and China will only aggravate that situation further. A crisis like this is ideal for the rise of ICO’s and cryptocurrencies.

But startups in the crypto-space beware. Just a decade ago it would have been unimaginable to ban US investors and the US dollar. Back then this would have been economical suicide. In 2021 it’s the new normal. The overreach of the SEC and the weaponization of the US dollar have made anything US toxic.

You can seriously decrease the risks by banning the US.

  • Don’t transact in US dollars.
  • Do not allow US residents, citizens to buy tokens or to invest in the organization issuing the tokens.
  • Do not accept investments from venture funds, as they can be used to hide US residents and citizens.

This will probably have a negative impact on your fundraising capabilities, but at least you will survive. Because if a project which raised $1,7B from only 171 ultra-accredited investors in a private token sale can be shut down, chances are you could be as well. So why take that risk.

Crypto isn’t going anywhere. Governments or bureaucrats can’t stop progress. They can slow it down, but not stop it.

If you can’t win the war, maybe it’s time to join. That’s what a lot of governments must be thinking as they are contemplating the introduction of national cryptocurrencies. But this is much harder for bureaucrats than it is for startups. Cryptocurrencies remove all the intermediaries like banks and central banks from transactions. Banks are not needed anymore. It’s interesting to imagine politicians dismantling the whole local banking industry. I don’t see that happen in the capitalistic US dollar financial legacy system anytime soon.

The disrupting of the trillion-dollar industry will not come from politicians or career bureaucrats and it won’t come from Silicon Valley.

It will come from startups and even may come from places with a different view on capitalism. China is already testing the digital Yuan, its own national cryptocurrency.

Thanks.

Alex Kleydints

Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://clarity.kleydints.com/the-1-5-billion-comeback-of-the-telegram-gram-crypto-bypassing-the-sec-and-the-us-10429774607?source=rss——-8—————–cryptocurrency

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