Founder Durov Arrested: Not Only an Issue of Free Speech, but also Cryptocurrency
The Financial Times reported that Telegram, the messaging app founded by Russian-born billionaire Pavel Durov, has been in the spotlight again recently after Durov was arrested in France. He was accused of failing to effectively control criminal content on the platform, an incident that has reignited discussions about free speech and the responsibilities of technology companies in platform management.
However, Telegram’s financial reports show that the app’s crypto business is as critical to its operations as the messaging service.
Introducing encryption business to reverse Telegram’s losses
According to Telegram’s 2023 financial report obtained by the Financial Times, cryptocurrencies contributed significantly to the company’s revenue. Telegram Group is incorporated in the British Virgin Islands and has one of its main operating subsidiaries in the UAE. The following profit and loss statement, signed by Durov, was provided by PwC Dubai in April.
Although the company recorded an operating loss of $108 million, revenue reached $342.5 million, primarily from crypto trading. Telegram’s financial report included a $500,000 digital asset revaluation gain and $86 million in other comprehensive income.
Telegram's main sources of revenue are its "integrated wallet" and "collectible sales", which account for more than 40% of the company's total revenue. This represents a significant shift in the company's business model, reflecting its growing reliance on digital assets.
Telegram 2023 financial report (Financial Times)
The source of income is mainly from integrating wallets and selling collectibles (Financial Times) Cooperating with the TON Foundation to encrypt wallets and becoming Telegram’s source of income
In 2023, Telegram integrated crypto wallets as a new revenue stream, allowing users to store, send, receive and trade cryptocurrencies. According to Telegram’s financial disclosures, the wallet generates revenue by providing services and facilitating transactions in Toncoin (TON).
Telegram’s financial report describes a strategy to integrate crypto wallets into a significant revenue driver. The service is offered through the Telegram app in partnership with the Toncoin (TON) Foundation, allowing users to seamlessly conduct crypto transactions within the messaging platform.
(New issues derived from cryptocurrency: The birth of a new darknet? Toncoin (TON) is used to fund pro-Russian hacker organizations and promote various illegal activities on Telegram)
Telegram’s digital assets are all Toncoin (TON), and the currency price maintains financial health
Telegram’s digital asset, consisting primarily of Toncoin (TON), is critical to the company’s financial health. The digital holdings are valued at nearly $400 million, far exceeding the company's cash and equivalents. Telegram significantly boosted its revenue by selling collectibles such as usernames and virtual phone numbers and accepting Toncoin (TON) as a payment method. These revenues are earned from fees when collectibles are distributed to users, or traded between users.
(Anonymous phone number provided by Telegram: Telegram privacy upgrade! Fragment launches "phone number" market, buy anonymous account for $17)
Telegram’s strategy of holding digital assets reflects its crypto investment approach. Gains on asset appreciation are accounted for, while losses are carefully managed through revaluation surplus in equity.
Telegram’s financial report shows that its digital assets are far greater than its cash and cash equivalents
Details of the increase in cryptocurrency holdings Durov bought Telegram convertible bonds and paid for 300,000 mg subscription account in Toncoin (TON)
The Financial Times specifically stated that Durov not only bought Telegram convertible bonds for US$64 million in 2023, but also bought 15,000 six-month Telegram subscription accounts (valued at US$300,000) for gifts and paid them in Toncoin (TON) Telegram.
"Balance and expenditure imbalance" financial stability is questionable, Telegram's valuation is too high
The Financial Times believes that despite the huge crypto earnings, Telegram’s financial report raises questions about its overall financial stability.
The company reported operating expenses of more than $450 million, a financial imbalance relative to revenue of $342.5 million. That, coupled with the company's reliance on digital assets, has cast doubt on the "more than $30 billion" valuation claimed by CEO Durov this year.
Telegram's significant liabilities include more than $2.3 billion in convertible bonds raised from high-profile investors including sovereign wealth funds and hedge funds. These financing vehicles provide capital while also underscoring the need for companies to maintain and expand their crypto operations to maintain investor confidence.
By the way, the current circulating market value of Toncoin (TON) is US$13.59 billion, but liquidity is limited. The trading volume to market value ratio on 8/31 was 0.018, which has dropped significantly recently. However, the price of Toncoin (TON) will rise significantly in 2024. If Telegram’s revenue from Toncoin (TON) will also increase significantly, it should be beneficial to the financial report. However, operations that rely on highly volatile cryptocurrencies as financial support may also face many risks.
The founder is arrested, Toncoin (TON) and Telegram are interdependent
Durov’s arrest, and the ensuing market reaction, also affected the value of Toncoin (TON), with traders reacting to uncertainty about Telegram’s future. The company’s financial disclosure revealed that it sold a large holding of Toncoin (TON) before the price dropped significantly.
(TON lock-up value plummeted by 53%, Telegram DeFi protocol assets lost a lot of money, and pledged TON dropped)
Issue coins with one hand, raise debt with the other
The financial report revealed events after the 2023 report. In March 2024, Telegram issued US$330 million in corporate bonds and received US$300 million in cash income, which will mature on March 22, 2026, with an annual interest rate of 7%. Interest is paid semi-annually. Telegram then sold Toncoin (TON) obtained from the integrated wallet, obtaining US$243 million in cash.
While Telegram is 100% owned by Durov, the company has raised more than $2.3 billion in convertible bonds from sovereign wealth funds, hedge funds and technology investors, the Financial Times said.
Financial Times Comment: Is it worth investing in Telegram?
The Financial Times commented that even putting aside its heavy reliance on cryptocurrencies and significant liabilities, one might question whether a business that had to burn more than $450 million in operating expenses to earn $342 million in revenue was worth it?
Telegram’s commitment to user privacy and limited content moderation have made it popular with users, but have also led to it facing regulatory scrutiny in many countries. As the company navigates legal challenges and changing global regulations, its financial strategy that relies heavily on crypto represents both a growth opportunity and a huge risk.
(Telegram founder Pavel Durov was indicted for a felony: assisting illegal transactions and organized crime, with a maximum sentence of ten years)
This article Financial Times reveals Telegram’s financial report: The encryption giant disguised as communications, its operating losses are supported by TON. First appeared on Chain News ABMedia.
