Telegram’s blockchainy thing, the Telegram Open Network, was supposed to launch in March (translation) — but apparently only started its private beta a week ago (translation), according to two of the development teams given access to the beta.
The ICO sales agreement has leaked. And Telegram has partnered with German fintech startup Wirecard — most famous in the UK for trying to get Dan McCrum and Stefania Palma from the Financial Times prosecuted for writing about them.
The GRAM token sales agreement leaks
Telegram got $1.7 billion selling Gram tokens, for use on the Telegram Open Network, to private investors in early 2018 — or, at least, selling an agreement to provide tokens when the network existed.
Reports came out that the sales agreement said the network had to be running by October 2019 — or they’d have to give the money back.
A document that appears to be the Purchase Agreement for Grams leaked (PDF, archive), and was obtained on 21 February by CoinTelegraph.
If the “Network Launch” does not occur — and Telegram does not issue the Gram tokens by 31 October 2019 — they will have to pay back the purchasers the $1.7 billion of actual US dollars they’ve already received.
But the agreement doesn’t clearly define what would count as a failure — just that the network is “a new blockchain platform,” and that “‘Network Launch’ means the public release of a version of the TON Network after completion of the test launch and security audits, as determined by the Issuer in its sole discretion.”
Nothing else is specified — it just has to be a thing that Gram tokens can exist on, that could plausibly be called a “blockchain platform.” Literally a database of accounts with addresses and balances, and an append-only Merkle tree ledger in there somewhere, would do the job.
Don’t worry about those many lengthy and detailed white papers Telegram put out — the sales agreement makes clear that:
… none of the documentation prepared by the Issuer or the Parent in connection with the Issuance or the development of the TON Network will constitute a Prospectus for the purposes of the Prospectus Directive and no Prospectus will be prepared, approved by any competent authority or published for the purposes of the Prospectus Directive
To fulfill the terms of the sales agreement, Telegram doesn’t really need any more than a payment network — a sort of Paypal-but-on-Telegram — much as Facebook’s planned “cryptocurrency” doesn’t require more than Paypal-but-on-Facebook.
Wirecard and the Blockchain
Telegram want to make the Gram tokens worth something. So they’ve formed a partnership with German financial services startup Wirecard, who sound quite pleased to be doing something blockchainy.
The companies plan “a joint digital financial services, payments and banking platform” that involves the Telegram Open Network in some manner — or at least TON Labs, the unit developing the Telegram Open Network.
There’s no details as yet — “The new partners will announce the release of products into the market in stages and communicate more details around the availability of the services in due course.”
Wirecard has had blockchain in their thoughts for a while — Axel Puwein, head of business development, mentioned in an interview (translation) with Economy (Austria) in November 2018 that Wirecard was looking into machine-to-machine payments on the Internet of Things, via “cryptocurrencies and blockchain technologies.”
Wirecard and the Financial Times
Those who follow financial news will know Wirecard better as the company that the Financial Times wrote up on 30 January 2019 as “Executive at payments giant suspected of using forged contracts” (archive) after an internal presentation that FT saw described “potentially fraudulent money flows” in their Singapore office. Singapore police raided the local office on 8 February.
BaFin, the German financial regulator, didn’t want to penalise Wirecard as the offences had happened outside Germany — but a senior German executive had approved the transactions in question.
The company’s share price promptly fell 35% on the FT story. Wirecard claimed “there had been increased short activities on the capital market side” — and BaFin banned shorting Wirecard until 18 April.
BaFin is now going after the FT journalists, Dan McCrum and Stefania Palma, who broke the news of the scandal. WirtschaftsWoche explains what Ehssan Khazaeli of BaFin was thinking:
Dan McCrum … used incorrect words. Thus Wirecard’s office had not been searched, the police had only collected documents. ‘That makes a wrong impression,’ says Khazaeli.
BaFin filed its complaint with the Munich criminal prosecution office a few days ago. The FT is standing by its story and journalists — “it is a smokescreen obscuring the serious allegations that were revealed by the FT” — and has a long-form writeup of the issue.
No crypto site writing up the Telegram-Wirecard press release has mentioned the company’s aggressive hostility to journalism— but it strikes me as pretty relevant to their foray into crypto.
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I’m sure that an investigation of Wirecard by the notoriously corruption adverse Singapore police can only end well for Wirecard. And indeed for Germany’s entire financial sector given the recent positive performance of Deutsche Bank…
I acknowledge that I know nothing about BaFin besides what I just read, but that seems like regulatory capture to me. Banning short selling in wirecard is like giving a gift to the company for getting caught cooking the books.
Wirecard is using the same tired old tactics that every company doing accounting fraud does in these situations. Blame short sellers, accuse them of being colluding with journalists, and try to sic the regulators on them.
I don’t see anything in the quoted material saying that Wirecard, as opposed to BaFin, is going after the journalists.
Sure, the words “fintech startup” already guarantee that nobody should do business with them, but some people haven’t yet learned that or think that they’re bigger sharks, and I think some more rigour is indicated. If there’s evidence that Wirecard have encouraged BaFin to take this action, let’s see it.