The arrest of the Telegram founder shocks the market, with support from Musk, Vitalik Buterin, and partners from Sequoia

Author: Arain, ChainCatcher

Editor: Marco, ChainCatcher

According to reports from AFP, Pavel Durov, the founder of Telegram, was arrested at Bourget Airport near Paris between 7:30 PM and 8:00 PM local time on August 24 (Saturday). French investigators issued a search warrant against him for violations related to encrypted messaging, while the French police also searched Durov's property.

It is reported that the 39-year-old billionaire holds dual citizenship in France and Russia. The OFMIN of the French National Judicial Police issued the search warrant, which is only effective on French territory. Pavel Durov rarely travels in Europe, but this time he arrived in Paris on a private jet from Baku with a woman and bodyguards, planning to spend at least one night in Paris.

Durov was arrested by agents from the French National Anti-Fraud Office (ONAF). According to information from agency employees, the reason for Pavel Durov's arrest is mainly related to the social media platform Telegram that he founded. Regulators accuse the platform of being rife with drug trafficking, arms black markets, and child pornography, while Telegram had previously refused to cooperate with the police on these matters.

The currently hot TON ecosystem in the crypto market is built on Telegram's products and user base. As of the time of writing, Coingecko data shows that the price of TON's native token has dropped about 14% in the last 24 hours, and DefiLlama data indicates that Toncoin's TVL has fallen by over 40% in the same period.

Elon Musk, founder of Tesla and owner of the X platform, commented on the news of "Telegram CEO Pavel Durov's arrest by French police" on X, stating that this incident is promoting "the First Amendment of the U.S. Constitution" and sarcastically remarked, "Welcome to Europe in 2030, where you can be executed for liking a meme."

Elon Musk also quoted comments from Sequoia Capital partner Shaun Maguire regarding this incident, pointing out, "Something similar just happened on Telegram":

"That was in 1994 when Vint Cerf and Rob Kahn were just arrested because their invention (TCP/IP) was used for communication between drug dealers, and they refused to install backdoors."

Musk himself is also embroiled in a conflict with the European Union.

Before interviewing Trump on X, Musk received a stern warning from Thierry Breton, the EU Internal Market Commissioner, regarding X's dissemination of "content that promotes hatred, chaos, incites violence, or certain misinformation."

Musk responded to Breton with a meme from the 2008 film "Tropic Thunder," where one character exclaims, "Take a big step back and literally… fuck your own face."

Reasons for Arrest Related to Telegram

Pavel Durov's arrest is related to the popular social software Telegram that he founded.

Launched in 2013, Telegram has a vision of free speech, claiming that "users can exchange encrypted and self-destructing messages, send photos, videos, and all types of files," making it the preferred platform for information exchange among cryptocurrency market participants, but it has also become a breeding ground for some criminal content.

According to Telegram's updated monthly active user (MAU) data from July, the platform currently has 950 million monthly active users.

With such a large user base and its emphasis on being a censorship-resistant social network, Telegram has drawn the attention of regulators in multiple countries, including France, Germany, and the United States. EU countries and the U.S. have pressured it, but Telegram has not responded to regulatory demands.

Pavel Durov is wanted in France, as recorded in the FPR (Wanted Persons Archive) by the OFMIN of the French National Judicial Police, based on a preliminary investigation that issued a search warrant. The judicial authorities believe that Telegram's lack of content moderation, insufficient cooperation with law enforcement, and the tools it provides (such as disposable numbers and cryptocurrencies) make him an accomplice to drug trafficking, child pornography crimes, and fraud.

Investigators from ONAF detained Pavel Durov and planned to transfer him to a pre-trial judge that evening. On Sunday local time, Pavel Durov may be formally charged with multiple offenses, including but not limited to terrorism, drug trafficking, conspiracy, fraud, money laundering, harboring, and child pornography.

"For years, it has become the number one platform for organized crime," commented an investigator in foreign media reports.

According to reports from the Russian news agency Sputnik, Pavel Durov could face up to 20 years in prison. Ekaterina Mizulina, head of the Russian Safe Internet League, believes that Durov's arrest in France was at the request of the United States.

She wrote on her personal Telegram channel, "I have long believed that the Telegram chief is in danger outside of Russia and could be arrested at any time. Similar situations have occurred at the request of the U.S. I initially thought that no one would act against him because he might have cooperation with Western intelligence agencies, but recent news suggests that everything seems different."

Additionally, Mizulina believes that Durov's arrest is aimed at cracking down on the super currency Toncoin circulating on Telegram. She stated that this way, the U.S. will continue its sanctions policy.

After Elon Musk and Shaun Maguire expressed support for Pavel Durov, Ethereum founder Vitalik Buterin shared his views on the "arrest of the Telegram founder" on the X platform, stating, "I have previously criticized Telegram for not taking crypto seriously enough. However, based on the information currently available, the accusations look very bad and raise concerns about the future of software and communication freedom in Europe."

The Billionaire Resisting Information Censorship

To understand Telegram, one must first understand Pavel Durov.

Born in 1984, Pavel Durov has a full-blooded brother, Nikolai Durov, and both brothers exhibited extraordinary mathematical and programming talents from a young age. At the age of 11, Pavel Durov created a derivative of the Tetris game and later collaborated with his brother Nikolai Durov to complete a strategy game set in China called "Lao Unit."

While in Russia, Pavel Durov realized the importance of information control and launched the Durov.com blog, attracting 2.7 million visitors, which caught the attention of his classmate Slava Mirilashvili. Slava Mirilashvili approached Pavel Durov, and together with Lev Leviev, they founded vkontakte.ru (hereinafter referred to as "VK"), persuading his wealthy father to fund and capitalize the project.

VK initially closely mimicked Facebook. Within six months of launching its beta version, it became the second-largest social media platform in Russia. However, as foreign capital competed for control of VK, and the Russian security agency FSB pressured VK to shut down seven opposition groups and provide user information during the parliamentary election controversies, Pavel Durov exhibited a non-cooperative stance—this incident also made him realize the importance of security and privacy in social networks.

Pavel Durov and Nikolai Durov eventually exited the VK project and founded Telegram at the end of 2013.

In 2014, Pavel Durov left Russia and attempted to settle in Berlin, London, Singapore, and San Francisco, ultimately establishing Telegram's headquarters in Dubai.

Telegram grew rapidly, during which Pavel Durov had to deal with the FBI and the U.S. Securities and Exchange Commission. Despite Telegram claiming that messages on the user end are encrypted, some technicians criticized the reliability of its security and privacy.

However, this did not deter users from choosing Telegram, especially when discussing content that might be censored.

By 2018, Telegram's user base had approached 200 million, yet it had not found a reliable profit model—Pavel Durov was known for disliking advertising on VK. However, he did not rule out cryptocurrency; foreign media reported that he had 2,000 bitcoins and $300 million when founding Telegram, speculating that he might have used this funding to launch Telegram.

In January 2018, Telegram announced the launch of the "Telegram Open Network" (TON), which is the predecessor of today's Ton, although the two are somewhat different. The old TON was a new blockchain supporting an in-app ecosystem, and Pavel Durov claimed that the network would prove to be "far superior" to existing chains like Bitcoin or Ethereum, planning to support payments and purchases, including those from third-party developers.

Telegram raised $1.7 billion through the sale of Toncoin tokens, with participants including prominent Silicon Valley investment firms such as Sequoia Capital, Benchmark, Kleiner Perkins, and Lightspeed. In September of that year, Telegram claimed that it had achieved "90-95%" of the initial construction progress of the old TON, but the following month, the U.S. Securities and Exchange Commission classified the old TON token financing as "the sale of unregulated securities." Under pressure from the SEC, Pavel Durov announced the abandonment of the project and returned 72% of the funds to old TON investors while also paying a $18.5 million fine to the SEC.

Although the project was declared a failure in that form, Pavel Durov handed over control of the old TON to the "community," open-sourcing its code and allowing anyone to continue building on the project's framework.

Later, a group of developers decided to launch a new TON in March 2020, initially forming a loose organization called NewTON, attracting other developers to build the new TON together.

In May 2021, NewTON was officially renamed the TON Foundation, and the old TON was renamed from "Telegram Open Network" to "The Open Network" (hereinafter referred to as "new TON"). The foundation for new TON was established in 2022.

With the launch of the foundation, new TON established a close cooperative relationship with Telegram, allowing Telegram to continue building on new TON.

Although the two appear to have no direct connection, Telegram chose new TON as its only built-in crypto network in its application in September 2023, with the goal of bringing 500 million Telegram users onto the blockchain by 2028—essentially converting 30% of Telegram's monthly active users into new TON users.

New TON claims that Telegram is a third-party developer for it, and the only real cooperation between the two currently is wallet integration.

It is worth noting that Toncoin is the largest asset on Telegram's balance sheet.

TON Plummets, Telegram IPO May Be Shelved

With Pavel Durov's arrest, the first impact is on the new TON closely related to Telegram, as well as related applications.

DefiLlama data shows that since the news of Pavel Durov's arrest spread, TON's TVL has seen a significant decline, currently around $300 million, with a drop of over 40% in 24 hours, down more than 60% from its historical high TVL of $777 million. Coingecko data indicates that the price of Toncoin has dropped over 14% in 24 hours.

The official X account of TON issued an urgent statement regarding "the arrest of Telegram's CEO": "As a community committed to free speech and decentralization, we stand firmly with Pavel during this challenging time. Pavel has always been a staunch advocate of these values, and we believe his efforts to promote an open and decentralized internet will continue to inspire millions. The TON community remains focused on our mission, and we will continue to work globally to uphold these principles. We encourage everyone to stay calm, united, and continue building as we collectively respond to this situation. Thank you for your continued support."

Telegram Wallet posted on social media stating, "We are closely monitoring the recent news regarding Telegram founder Pavel Durov, but these events will not affect the operation of the Wallet in any way."

Telegram's official X account has not yet issued any statements.

It is noteworthy that Telegram issued $1 billion in bonds in March 2021, and according to foreign media reports, Telegram is considering an IPO plan, which may be inspired by the terms of the bond issuance.

According to the Russian newspaper Vedomosti, Pavel Durov has begun discussions with investment banks and is looking for suitable listing locations, including the New York Stock Exchange and certain Asian exchanges.

Pavel Durov previously claimed that Telegram is expected to achieve profitability this year.

While it is unclear why Pavel Durov went to Paris knowing that France had issued a wanted notice against him, his arrest at a time when Telegram is considering going public may impact Telegram's IPO plans.