When French authorities detained Telegram founder Pavel Durov this week, it spelled bad news for the crypto community.
For years, crypto founders, devs, investors, and all manner of users have flocked to the platform and formed groups to communicate, collaborate, and help grow their ventures.
Durov’s arrest suggests European authorities are intensifying their push to hold software developers responsible for the activity that takes place on their platforms.
‘Absurd claim’
Prosecutor Laure Beccuau said Durov was detained as part of an investigation that began on July 8. The subject of that investigation is an unnamed person charged with a dozen crimes, including offering certain “cryptology services” without government approval.
The legal dustup does not sit well with many in or affiliated with crypto, including Telegram.
“It is absurd to claim that a platform or its owner are responsible for abuse of that platform,” the social media company said in a statement on Sunday.
This is a similar argument Alexey Pertsev, the onetime Tornado Cash dev, made at his $2.2 billion money laundering trial earlier this year.
While Pertsev contended he couldn’t be held criminally liable for illegal transactions on the automated crypto mixer, a Dutch court disagreed and sentenced him to a little more than five years in prison.
Now others see a similar pattern playing out yet again.
“The founder of Telegram getting arrested because of what others did with his invention is not a good precedent,” Jose Fabrega, head of marketing at Metis, an Ethereum-based blockchain, wrote on X. “Pavel Durov’s arrest is the Tornado Cash case all over again.”
‘At the heart of this case is the lack of moderation and cooperation from the platform.’
Jean-Michel Bernigaud, Ofmin
The problem isn’t just that Durov has been arrested. It’s the gravity of the alleged wrongdoing French authorities are examining in connection with Telegram.
On Monday, French officials said the unnamed subject of their investigation was offering “cryptology services to ensure confidentiality” without a government-required declaration.
Blind eye
Media reports say the police suspect Telegram is turning a blind eye to the dissemination of child pornography and the use of the platform in crimes ranging from narcotics peddling to money laundering.
“At the heart of this case is the lack of moderation and cooperation from the platform,” Jean-Michel Bernigaud, the head of the French law enforcement agency Ofmin, in a LinkedIn post on Monday. “Particularly in the fight against pedocriminality.”
Telegram rejected the allegations.
“Telegram abides by EU laws, including the Digital Services Act — its moderation is within industry standards and constantly improving,” the company said.
Now Durov’s situation is bound to intensify the debate about developers’ responsibility to police their own platforms.
Preston Byrne, a crypto attorney, crystallised what’s at stake on his personal blog on Sunday.
“Absent a lot of evidence that shows that Durov and Telegram specifically intended to commit these crimes or bring them about,” he wrote, “there is no reason why similar charges could not be laid against any other provider of social media services in France whose moderation practices are anything less than perfect, in particular social media services which provide end-to-end encryption.”
Flashpoint
The case is also a flashpoint for free speech. Crypto analyst Noelle Acheson called the action against Durov the latest “affront” to civil liberties.
“Apparently, unregulated messaging platforms are being held to the same standards as regulated banks, who have to comply with an unreasonable amount of rules to (unsuccessfully) prevent money laundering,” she wrote in her newsletter, Crypto is Macro.
Ari Redbord, global head of policy at TRM, agreed.
“It is extraordinary that a developer of an application can be held criminally liable for the use of the platform alone,” he wrote on Linkedin.
“And the case will have far-reaching international implications, as it highlights the ongoing tension between the protection of free speech and the necessity to combat illegal activities online.”
There’s more to come.
Pertsev’s colleagues, Tornado Cash co-founder Roman Storm, faces similar charges in the US. His trial is scheduled to begin in Seattle later this year.
Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.