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The arrest of Telegram Founder/CEO Pavel Durov could have dire implications for the messaging platform’s crypto-savvy criminals.
On August 24, Durov was arrested at an airport near Paris, to which he’d flown on a private jet following a trip to Azerbaijan (allegedly in a failed bid to meet with Russian President Vladimir Putin). French prosecutors said Durov was detained as part of a probe opened on July 8 against a “person unnamed” for a multitude of Telegram-linked crimes.
These crimes include drug trafficking, child sex abuse material (CSAM), organized fraud, money laundering, distribution of digital hacking tools, and “providing cryptology services aiming to ensure confidentiality without certified declaration.” The unnamed individual is also accused of refusing “to communicate, at the request of competent authorities, information or documents necessary for carrying out and operating interceptions allowed by law.”
The seriousness of Durov’s arrest was underscored by a charge of “criminal association with a view to committing a crime or an offense punishable by 5 or more years of imprisonment.”
France’s AFP wire service said the arrest warrant was issued by OFMIN, a branch of the French police focused on crimes against children. OFMIN Head Jean-Michel Bernigaud wrote a LinkedIn post saying the crux of the warrant involved Telegram’s “lack of moderation and cooperation … particularly in the fight against pedocriminality.”
Following Durov’s arrest, Telegram issued a statement saying it was “absurd to claim that a platform or its owner are responsible for abuse of that platform.” Telegram insisted that its moderation policies are “within industry standards and constantly improving.”
A Russian national, Durov also holds citizenship in France, the United Arab Emirates, and St. Kitts & Nevis. Both Russian and Emirati officials have reportedly sought consular access to Durov. Late on August 26, a French judge extended Durov’s police custody for up to 48 hours, after which the authorities must either charge or release him.
In June, Durov told Tucker Carlson that Telegram had only “about 30” full-time staff, few of whom appear to be tasked with monitoring the activity of Telegram’s nearly 1 billion users. It’s not surprising that Telegram’s laissez-faire approach has made it a hub for activities frowned upon by most governments.
Telegram has long been known as a platform on which criminality thrives, a darknet marketplace accessible by virtually anyone. Drugs, guns, CSAM, hacking tools, stolen personal data… it’s all there for the asking without having to learn how to use Tor software, with payments predominantly made using digital assets.
Telegram has proven popular with terrorist groups, including (at one point) ISIS. Terror groups in India are also said to be fans of the platform, and local media reported that India’s ministries of Home Affairs and Electronics & Information Technology were recently asked “what action can be taken” against Telegram, although these reports are said to focus on Telegram-based extortion and illegal gambling.
The dark(net) ages
Durov’s arrest appears to have provoked the ire of some bad Russian actors. Multiple French government websites—including the Administrative Court of Paris—were targeted by distributed denial of service (DDoS) attacks that briefly took them offline after Durov was detained.
Also protesting Durov’s arrest was Paolo Ardoino, CEO of the Tether (USDT) stablecoin, who called Durov’s arrest “very concerning.” Ardoino claimed that Durov was detained “for enabling free speech communications” and doom-posted that “If we, as a society, lose the battle to defend freedom of speech and communication, nothing else won’t matter, dark ages will be our future.”
In April, Tether launched USDT on The Open Network (TON), a Durov-developed blockchain affiliated with Telegram. Since then, the total amount of USDT on TON has risen to nearly $620 million, with an additional $110.3 million in ‘authorized but not issued’ USDT.
One of the key features of USDT-on-TON is the network’s direct access to fiat on-ramps. Off-ramps to bank accounts/cards were said to have been in development at the time of that April launch.
Like Telegram, Tether has unsuccessfully tried to shed its own association with criminality, with no less an authority than the United Nations Office on Drugs and Crime (UNODC), citing USDT’s role in organized crime’s banking architecture.
TON of fun
Some Russian public figures have claimed that Durov’s arrest was “targeting TON cryptocurrency, which is used as a wallet by many large Russian businesspeople.”
TON launched a native token (Toncoin) several years ago after a failed attempt to launch a token called GRAM directly on Telegram. The U.S. Securities and Exchange Commission (SEC) put the kibosh on this GRAM plan, warning Telegram of the illegality of issuing unregistered securities via initial coin offerings. Telegram ultimately refunded the money it raised via this ICO and reached an $18.5 million settlement with the SEC in June 2020.
Telegram integrated Toncoin into its user interface last November, allowing direct payments between Telegram users, leading to a spike in the token’s value. This offered a degree of obfuscation for bad actors transacting without having to leave the platform.
Telegram’s popularity with Russian-speaking users—who make up nearly one-third of its total user base—helped convince Russian financial institutions and other payment services to establish their own presence on the platform.
Toncoin’s value quadrupled this spring after Telegram introduced an ad-sharing program that allowed the platform’s ‘content creators’ to display ads in their channels in exchange for 50% of the ad revenue (paid out in Toncoin). Tether’s launch of USDT on TON a few months later poured additional fuel on this fire.
Following Durov’s arrest, Toncoin’s market cap tumbled from over $17 billion to around $13.5 billion. The token has since recovered a bit of this ground but everyone appears to be waiting for the other shoe(s) to drop. On August 28, TON-based community platform Tonk Inu posted on X that the TON network had been “experiencing outage” due to “a high volume of traffic due to $DOGS.”
It’s been suggested that Durov’s traveling companion, Yulia Vavilova—a self-described ‘crypto coach’ who arrived in Paris on Durov’s plane but hasn’t been heard from since—may have accidentally telegraphed Durov’s arrival in France in advance via her social media posts, possibly allowing French prosecutors to get their paperwork in order ahead of time. Oops.
Shrug off
Durov’s public posture of not bowing to government requests for customer info—that is, from governments not led by Vladimir Putin—has made him an icon among the ‘crypto’ set. Some liken him to Alexey Pertsev, the developer/co-founder of the Tornado Cash mixing service, who, like Durov, claims that he ‘just writes code’ and isn’t responsible for how customers use the service.
But Pertsev received a 64-month sentence this spring after his ‘see no evil’ arguments failed to impress the Dutch judges presiding over his trial. Durov may have an edge over Pertsev in this comparison, in that Telegram is an actual communications platform, whereas Tornado Cash (in the words of the judges) “is not a legitimate tool that has unintentionally been abused by criminals.”
But in words that might give Durov pause, the Dutch court noted that “under the pretense of an ideology, [Pertsev] did not care about law and regulations and felt untouchable.” And despite pleas from authorities and victims of crypto crime, Pertsev “chose to look away from the abuse and did not take any responsibility.”
Memo to Durov: When that ‘abuse’ is the sexual abuse of children and your response is a shrug, responsibility is coming back at you with a vengeance.
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