Telegram on Track to Pocket Over $2 Billion From ICO Rounds, Despite SEC Prying Into the Funding Method

Despite only running for four months, global messaging giant Telegram’s initial coin offering (ICO) is already on track to bring in one billion dollars — long before the product the company is raising money for is even built. Funding from the initial round of investors has already made the company’s launch the biggest ever. Telegram’s goal is to make it to over $2 billion total, a figure that will dwarf the previously largest launch which was conducted by Tezos and raised $232 million.

This move comes as financial authorities around the world have been cracking down on some ICOs, which seemed to rise out of nowhere last year as a novel way for start-ups to raise millions and millions of dollars in short periods of time. Since the start of the year, the U.S. Securities and Exchange Commission (SEC) has been issuing subpoenas, demanding information about coin offerings that may have violated the law — the problem is that how to apply existing laws still remains largely unclear. Despite this, companies like Telegram are still proceeding with their offerings.

Telegram’s ICO

The company has taken in $850 million over the past two months from some of the biggest venture capital firms in Silicon Valley, and it is now aiming to raise another $850 million over the next few. Further, a third $850 million round is in the works after that, according to the company’s white paper.

As per the white paper, Telegram plans to use its newly raised funds to create both a new kind of global computing network and a digital currency, the Telegram Open Network (TON), combining the attributes of existing virtual currencies like Bitcoin and Ethereum.


Some of Silicon Valley’s biggest venture firms have signed up to invest in the project, including Benchmark, Sequoia, and Kleiner Perkins, according to two people briefed on the private deal who asked to remain anonymous. That said, a lot of the venture capitalists that have invested other ICOs in the crypto-space have so far shied away: companies like Union Square Ventures, Andreessen Horowitz, Greylock, and Polychain Capital (according to the New York Times).

Arguably the main reason the ICO is attracting skepticism is that there is not even a prototype for the project — just the white paper, which outlines what Telegram intends the project to look like in the future. The company’s team has promised to release the software late this year or early next year.

“I cannot, in 132 pages, gain the slightest intuition as to how to go about proving that the hard problems it needs to solve will be solved,” Charles Noyes, an analyst at Pantera Capital wrote about the Telegram project.

On the other hand, supporters of the Telegram ICO and project have said that the company has a team of developers that have already proven themselves by building two incredibly popular tech products, VKontakte and Telegram.


The Telegram app has been popular in countries with authoritarian regimes because it guarantees that all messages are encrypted and protected from government snooping. It’s this pro-privacy stance that has made it popular with many in the cryptosphere.

The company plans on using capital from its ICO to build a platform that rivals Ethereum. The Telegram Open Network (TON) is scheduled to be an ecosystem that supports apps, services, and a store — for both physical and digital goods. It aims to become an equivalent to the popular payment systems that other global messaging programs like WeChat have built.

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2017 could certainly be considered the year of the Bitcoin. ICOs, the crowdfunding method made headlines almost as much as the cryptocurrency, so how exactly did they fare? Not well according to reports which indicate that despite having raised more than $104 million, 46% of 2017’s ICOs are effectively already dead.

The report was compiled from information from Tokendata, a leading comprehensive ICO tracker, which lists 902 ICOs taking place last year. Of these, 142 failed at the funding raising stage and 276 have since failed, either due to taking the money and running in a classic exit scam or just slipping into obscurity or exile. This brings the number of failed ICOs to 418 out of 902.

And it gets worse: An additional 113 ICOs have been classified as “semi-failed,” either because their team has removed their presence from the internet and social media, or because the community is too small to move the project forward successfully. Taking into account semi-failed ICOs brings the percent effectively dead to a staggering 59%; 531 out of 902 gone, and with them $233 million.

Looking at the countries of origin for failed ICOs shows that developing nations – in particular, countries in Africa – are over-represented. These ICOs just leave behind the bones of their projects: deleted Twitter accounts, empty Telegram groups, websites no longer hosted, and communities no longer tended are par for the course.

Many of the dead ICOs were doomed from the start — those familiar with the ICO space might recall projects like Clitcoin and Zero Traffic. Others, like freight trucking platform Doft – which fell flat at the fundraising stage – are starting over, hoping last years failures can be written off as a trial run.

Fast Forward

These reports come as Telegram’s record-breaking ICO is raising suspicion from some industry insiders and crypto enthusiasts. The company raised $850 million last year — and has just announced that it intends to hold a second ICO to raise more. Matthew Green, cryptographer and professor at Johns Hopkins University, finds some of the claims in Telegram’s white paper unrealistic:

“I’ll be honest, the white paper reads like someone went out on the internet and harvested the most ambitious ideas from a dozen projects and said ‘let’s do all of those but better!’ It feels unachievable, at least at the scale they’re aiming for now.”

Despite all this, there are some positive developments: Tezos, which raised $232 million last year, is back on track with their project after concerns that the token was never going to materialize following months of delays and infighting between executives.

The Tezos ICO raised $232 million last July for the blockchain startup. Seven months later, after progress was delayed due to infighting between the founders, the project’s tokens are finally set to launch “in the next few weeks.”

The Tezos foundation raised funds to develop a new cryptocurrency last July through an initial coin offering (ICO) that generated $232 million. While the ICO remains one of the largest by amount raised, contributors have yet to receive the new cryptocurrency because the project’s release has been delayed by infighting between the project’s founders, Kathleen and Arthur Breitman and Johann Gevers.

Gevers, president of the Tezos Foundation — which was set up to oversee the launch and development of the blockchain project — stepped down from his post Thursday following the disputes with the Breitmans. The two had called for the resignation of the foundation trustee last fall, after accusing him of attempting to embezzle money and acting “as a roadblock to the mission.” The Foundation said in a statement that Gevers had stepped down voluntarily, to “optimally support” the mission and was “committed to the success” of the project.

Ryan Jesperson and Michel Mauny will now join the board of the Tezos Foundation, replacing Gevers as well as Diego Olivier Fernandez Pons. Jesperson, who invested in the Tezos ICO, started an international petition last year to oust Gevers; Earlier this month he set up a rival group, the T2 Foundation, to pursue the launch of the Tezos network. Manuny is also a member of the T2 Foundation.

“With the appointment of the two new members to the Board, the Foundation is preparing itself to assist in the timely launch of the Tezos network,” the Tezos Foundation said in a statement.

Moving Forward

This shakeup in leadership clears the way for Tezos to release the tokens, which will facilitate a blockchain network for smart contracts that aims to rival Ethereum. In fact, the price for pre-launch tokens surged more than 10% after the announcement today. Gerves posted on Twitter “TEZOS ACHIEVES IMPORTANT MILESTONE,” sharing the news of the changes.

“After months of very hard work under extremely difficult conditions, I’m very happy that we’ve achieved a good resolution that optimally serves the interests of the Tezos project and the wider crypto ecosystem,” he said.

Tezos had been looking to a February release date for the coins, a deadline that now seems within reach. Speaking at a UCLA event on February 18th, CEO Kathleen Breitman said the company was planning on “going rogue” and releasing the tezzies (as the tokens are known) “in the next few weeks.”

The resolution of the dispute with Gevers also takes some pressure off the project, which ran into other legal problems as a result of the delays and ongoing battle. Tezos has been deflecting rumors of an investigation into the company by the U.S. SEC, and also has been hit with class action lawsuits alleging securities fraud as a result of the delays.

Now, investors are watching with anticipation to see if Tezos and the new leaders of its governing body can deliver — something which seems closer than ever following these announcements and a reinvigoration of the team. 

Earlier this week, the Wall Street Journal reported that the founders of Tezos, the Ethereum-based blockchain project which previously had raised $232 million from its initial con offering (ICO) have engaged in a legal battle over the ownership of the project.

By far, Tezos, the blockchain project endorsed by billionaire investor Tim Draper, has run the most successful ICO in history, surpassing other projects such as Bancor that have raised over $150 million in their campaigns.

Tezos Launch Delayed Due to Ownership Conflict Amongst Founders

But, upon raising over $232 million in its ICO, Tezos has not even come close to introducing its software and product to the public. More importantly, the launch its crypto-token, which investors have been highly anticipating, has been delayed indefinitely.

Paul Vigna of WSJ has revealed that the delay in the launch of Tezos was triggered by an ownership battle between the wife and husband duo Kathleen and Arthur Breitman, and Tezos founder and president Johann Gevers. According to Vigna, an attorney representing Katheleen and Arthuer Breitman sent a document to the Tezos Foundation’s board, requesting the removal of Gervers. Vigna wrote:

“A lawyer representing the Breitmans on Sunday sent a nine-page letter to the foundation’s board, demanding that its founder and president, Johann Gevers be removed, or they would withdraw their support from the project. He has alleged the Breitmans’ involvement in his work ‘was incompatible with the needed independence of the foundation,’ according to a separate letter from a Breitman lawyer, which referenced a Sept. 21 meeting at which Mr. Gevers made the claim.”

Consequently, until the conflict between the founders of the Tezos project is resolved, the launch of the Tezos platform and its token will be delayed, indefinitely.

Vitalik Buterin Warned This Centralization Issue in ICOs

The Ethereum blockchain network and protocol in which ICOs are conducted are decentralized. But, it is difficult to justify ICO projects on Ethereum as decentralized projects, because they are operated by centralized development teams. Public blockchains such as Bitcoin and Ethereum are sustained by open-source communities.

Bitcoin for instance, is run by an open-source community of developers, miners, businesses, node operators, and users. A centralized group of authorities or founders cannot manipulate, censor, delay, or alter the Bitcoin protocol in any way, without launching an attack on the Bitcoin blockchain, which is virtually impossible.

In an interview with major South Korean business and financial news publication Joong Ang, Buterin explained:

“ICOs are a powerful tool and one that in many cases is an important aid in funding protocol development. In general, open-source protocols are very hard to monetize, and so the fact that in this particular area, we actually do have a way to monetize protocol development is something that we should be thankful for. However, they also have their flaws, and I think many of these flaws arise from the fact that even though the ICOs are happening on a decentralized platform, the ICOs themselves are hardly centralized; they inherently involve many people trusting a single development team with potentially over $200 million of funding.”

Essentially, investors in projects like Tezos, which describe the ICO process as a “non-refundable donation” have to trust in the blockchain project and its founders to deliver upon their promise because apart from that trust, there exists no legally binding agreements the founders have to commit to.

Initial Coin Offerings (ICOs) and crowdsales have become the new way of fundraising in the startup ecosystem. If the company or the product has got remotely anything to do with blockchain or fintech, then the chances of success are much higher. Tezos, a blockchain self-governance platform has proven it by breaking records to become the highest grossing ICO of all times.

The recently concluded Tezos crowdsale has raised over $230 million within a span of 13 days. The ICO which went live on July 1, 2017, attracted 65,645 BTC and 361,112 ETH, surpassing all the earlier records to become the most successful ICO ever. The total funds collected by Tezos is at least $80 million more than Bancor, which held the previous record by raising a total of about $150 million.

The creators of the platform call Tezos a “self-amending” cryptoledger, which entirely transfers the power to decide network-wide protocol level changes to the stakeholders. The model adopted by Tezos is expected to prevent a repeat of the issues currently being faced by Bitcoin Network and the earlier predicament that forced Ethereum to introduce a hard fork.

The platform is conceptualized by Dynamic Ledger Solutions Inc, a company founded by Arthur and Kathleen Breitman. Arthur’s education includes math, physics, and computer science. He has been intimately involved in the financial industry as well, following his stints in Goldman Sachs and Morgan Stanley. Similarly, Kathleen has been associated with the Wall Street Journal, Bridgewater Associates, Accenture, and R3.

Apart from the founders, the Tezos platform is backed by a dynamic development team with lots of experience in computer science related subjects. In addition, the advisory board includes heavyweights like Zooko Wilcox from ZCash, Emin Gun Sirer, and Andrew Miller.

The success of the ICO is dependent not only on the project and its capabilities to solve real-world problems, but also the names associated with the projects. In Tezos’ case, the project has the right combination of both, which has played a pivotal role in the successful multimillion dollar crowdsale.

Ref: Futurism | Tezos Whitepaper | Image: NewsBTC