SEC Reveals Telegram's Communications With Investors, Seeks to Question Advisor

The U.S. Securities and Exchange Commission (SEC) wants Telegram’s former chief investment advisor to testify and hand over documents related to the company's $1.7 billion 2018 token sale.

AccessTimeIconDec 6, 2019 at 11:50 p.m. UTC
Updated Sep 13, 2021 at 11:46 a.m. UTC

The U.S. Securities and Exchange Commission (SEC) wants Telegram’s former chief investment advisor to testify and hand over documents related to the company's $1.7 billion 2018 token sale.

The SEC has asked the High Court of England and Wales to obtain the testimony and documents from John Hyman, a former investment banker with Morgan Stanley and Renaissance Capital who resides in the U.K.

The trans-Atlantic request was revealed in a trove of documents filed by the SEC Friday with the U.S. District Court of the Southern District of New York. The agency is seeking to halt the launch of TON, Telegram’s ambitious blockchain project, and the issuance of TON’s tokens, named grams. The SEC considers grams unregistered securities – an allegation Telegram has repeatedly denied

According to the Friday filing, the SEC is seeking Hyman’s testimony as he has been closely involved in raising funds for TON and communicated with “over a dozen” investors. Telegram CEO Pavel Durov described Hyman in January 2018 as the chief investment advisor at Telegram and the person who “runs the distribution of Grams,” the SEC says. 

Hyman “communicated with Grams purchasers, confirmed transaction details, and provided ongoing updates to investors about investments.” 

Eye on the grey market

The filing, relying on the company's email exchanges with U.S. investors, reveals some fundraising tactics used during Telegram’s unprecedented $1.7 billion token pre-sale. 

For example, in one email, Hyman said that Telegram “decided for regulatory reasons that we will never do any form of direct public offering, … the public will be able to buy grams once network is working … not from Telegram directly.”

Writing to Google Ventures’ Blake Byers in May 2018, Hyman said there would be a third private round, in addition to the two completed in February and March – the plans that apparently got shelved at some point. 

The advisor has been also keeping an eye on the grey secondary market for grams that emerged immediately after the first round of sales in February 2018, the filing says. 

Although TON investors were strictly forbidden to resell their allocations under the threat of losing their future grams, the secondary market, in fact, flourished, with multiple offerings from small exchanges, brokers and individual OTC dealers, as CoinDesk previously reported

According to the communications between Hyman and one of the investors’ representatives, Telegram’s advisor would regularly ask for updates on the secondary market of grams. “Hi Stan have you seen any grey market gram activity if so at what prices,” one of Hyman’s emails read. 

Durov's mail

The filing contains, among other attachments, an email exchange between Telegram CEO Pavel Durov and some of the prospective TON investors in the beginning of 2018. For example, in January 2018, Durov scheduled a meeting between himself, Hyman and the investment firm Kleiner Perkins’ partner Mamoon Hamid in London. 

The communication between Durov and Hamid started in October 2017, when Hamid was introduced to Durov by a person named Jared Leto – it’s unclear if the popular singer and actor himself was involved. However, the person used the email hosted on the celebrity’s official website A request for comment from Leto's agent was not immediately returned.

Durov asked Hamid about his interest in investing in blockchain tech and said that he had to cancel his U.S. trip as the gram presale “reached 2x oversubscription too soon.” 

Hamid, in turn, told Durov that blockchain was “an active area of interest for me and K[leiner]P[erkins]. At my previous firm, Social Capital, we invested 2% into BTC in 2013 and we were one of the biggest investors in the DCG (Digital Currency Group) since 2011,” Hamid wrote.

Apart from Kleiner Perkins, Durov introduced Hyman as Telegram’s chief investment advisor to other potential investors, including the founder of Insight Venture Partners Jerry Murdock, Dave Munichiello of Google Ventures, Pete Briger from Fortress Investment Group, Yosuke Sasaki and Rajeev Misra of Softbank. 

Reluctant witness

The SEC asked the U.S. court to issue a Letter of Request to the Senior Master of the High Court (Queen’s Bench Division) of England and Wales, requesting the deposition of Hyman, a UK citizen who is currently residing there, the filing says. The procedure is possible thanks to the Hague Convention, which allows courts to seek evidence and testimonies beyond their own jurisdictions, the filing says. 

Hyman won’t meet the SEC voluntarily, the filing says, this is why the court should be seeking the help of the overseas judicial system. Initially, SEC attorney Jorge Tenreiro reported contacting Hyman’s counsel, Greg Campbell, in London and got a response that Hyman agreed to appear voluntarily for a deposition. 

However, after that “Mr. Campbell has refused to return multiple phone calls and emails regarding Mr. Hyman’s deposition,” so the SEC decided to get the British court involved. The last emails sent between Tenreiro and Campbell attached to the filing are dated Nov. 27.  

In addition to Hyman’s testimony, the SEC is also seeking to obtain his written communications with Telegram’s leadership and investors, documents about his employment at Telegram and his own investment in grams. 

According to the SEC information, Hyman left his job at Telegram and is now working at Gram Vault, the custodian for grams that earlier claimed to be working with TON’s largest investors. Gram Vault has also negotiated the listing of grams at the crypto exchange Poloniex, explaining that Telegram itself can not do so. 

Working at Gram Vault, Hyman also helped to establish a connection with the crypto custodian Anchorage, which was expected to be Telegram’s partner serving U.S. customers, according to his email exchange with the company. Anchorage wasn't immediately available for comment.

Exemption unavailable

The filing also expands on the SEC’s reasoning about why it believes grams are unregistered securities, despite Telegram’s arguments to the contrary and the fact that it reported the offering as exempt under Regulation D. 

According to the SEC, Telegram claimed that the Grams Purchase Agreements (SAFT contracts) were exempt from registration requirements but did not claim the same for the gram tokens themselves. Plus, “in any event, the exemption from registration under Regulation D is not available to Telegram,” the filing says. 

Insisting that grams were securities by design, the SEC writes that Telegram allowed the investors to buy grams with a goal to later resell them with profit on a broad secondary market and did not take steps against that. 

“Telegram’s marketing materials reasonably led purchasers of Grams to view them as an investment into a common enterprise from which they could hope to profit based on Telegram’s efforts to develop a business,” the SEC said. As a result, the investors “acquired substantial quantities of Grams that would far exceed any purported use of the Grams in whatever ecosystem Telegram promised in the future.”

Previously, the court ordered the depositions of Telegram's CEO Pavel Durov, vice president Ilya Perekopsky and investor relations officer Shyam Parekh. Telegram had to postpone the launch of its TON blockchain this October due to the lawsuit from the SEC. 

The company is expected to meet the SEC in court on February 18-19, 2020.


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