Telegram is under investigation in India after the arrest of its co-founder, Pavel Durov, on Aug. 24. The investigation is focused on allegations of illegal activities on the platform, including gambling and extortion. The investigation could potentially lead to a ban on Telegram in India, where it has a massive user base. Meanwhile, the U.S. SEC has charged two brothers in a $60 million crypto Ponzi scheme, and crypto platform Abra has settled with the SEC over regulatory violations. Additionally, former FTX co-CEO Ryan Salame is contesting his guilty plea in a campaign finance case.
Telegram Faces Investigation in India
Telegram is currently under investigation in India after the arrest of its co-founder, Pavel Durov, by French authorities on Aug. 24. The investigation is led by India's Ministry of Home Affairs and the Ministry of Electronics and Information Technology, and is focused on alleged instances of gambling, extortion, and other illegal activities on the platform. The outcome of this investigation could potentially lead to a ban on Telegram in India, where it has its largest user base with an estimated 104 million users.
Reports from users in India have been conflicting. Some claim they can no longer access the Telegram Wallet feature, which now displays an "unsupported region" message. However, others report they are still able to access the wallet without any issues.
Durov's arrest has caused a big stir in the crypto community, and there has been widespread reactions on social media. Telegram responded to the situation on Aug. 26 by defending Durov, and stating that it is "absurd to claim that a platform or its owner is responsible for the abuse on that platform." The company also holds firm that it complies with EU laws, including the Digital Services Act, and that its content moderation policies are in line with industry standards and are continually improving.
The arrest was initiated by France’s L’Office Mineurs, which is an agency that is responsible for investigating crimes against minors. A search warrant was issued by the agency as part of a broader investigation into alleged incidents of drug trafficking, fraud, organized crime, terrorism, and child abuse materials on Telegram. French officials are also concerned that the platform's lack of content moderation makes it possible for these illegal activities to thrive unchecked.
French Prime Minister Emanuel Macron said that Durov's arrest was not politically motivated, and stated that the French judiciary will independently determine the outcome of Durov's case.
SEC Charges Brothers in $60M Crypto Ponzi Scheme
It is not just Telegram that currently finds itself in some legal hot water. The United States Securities and Exchange Commission (SEC) charged two brothers, Jonathan Adam and Tanner Adam, for allegedly operating a $60 million crypto Ponzi scheme that is centered around a fictitious crypto trading bot. According to the SEC's complaint that was filed on Aug. 26 in the United States District Court for the Northern District of Georgia, Atlanta, the brothers lured more than 80 investors by promising monthly returns of 13.5% through a bot that identified arbitrage opportunities in crypto markets.
SEC’s complaint (Source: SEC)
The SEC alleges that from January 2023 to June 2024, the Adams claimed their bot could execute trades by exploiting price differences across various crypto platforms. They also claimed that investor funds were being used to finance flash loans. However, the SEC argues that the trading bot never even existed, and the brothers instead misappropriated $53.9 million of the $61.5 million that was raised.
The SEC believes they spent it on luxury items, including cars, trucks, and a $30 million condominium. Some funds were returned to investors, but a chunk of the money was used to fund their lavish lifestyles.
Misappropriated funds (Source: SEC)
Justin Jeffries, Associate Director of Enforcement in the SEC’s Atlanta Regional Office, labeled the scheme as entirely fraudulent, as the promised high returns were based on a non-existent investment. The SEC was able to obtain emergency asset freezes for the brothers' companies, GCZ Global, LLC, and Triten Financial Group LLC, to prevent any further losses.
The SEC also claims that Jonathan Adam misrepresented his background to gain investors' trust as he did not disclose his three prior securities fraud convictions. Both brothers have been charged with violating the antifraud provisions of federal securities laws, with the SEC seeking permanent injunctions against their companies, the forfeiture of all investor funds, and civil penalties.
Abra Settles With SEC
Meanwhile, the SEC announced that crypto platform Abra has agreed to a settlement over allegations that it failed to register the offers and sales of its lending product, Abra Earn. According to an Aug. 26 notice, Plutus Lending, operating as Abra, agreed to pay civil penalties and accepted an injunction preventing further violations of securities laws. The SEC charged Abra with failing to register its lending product and operating as an unregistered investment company.
Stacy Bogert, Associate Director of Enforcement at the SEC, stated that Abra allegedly sold its own securities while avoiding the regulations set by the Investment Company Act, which are designed to protect investors by minimizing conflicts of interest. The SEC also stated that their enforcement investigations are based on economic realities rather than superficial labels.
The SEC alleged that Abra marketed its Earn service as a way for investors to earn interest "auto-magically" while generating income for itself. Abra started offering Abra Earn to U.S. investors in July of 2020, and managed around $600 million in assets at its peak. Abra discontinued the Earn service in 2022 and transferred the assets of U.S. users to their Abra Trade accounts in 2023.
This SEC notice came after a previous settlement that was reached by Abra and its CEO, William Barhydt, in June with 25 U.S. state regulators over operating without a license. In 2020, Abra was fined $300,000 by the SEC and Commodity Futures Trading Commission for offering "security-based swaps" to retail investors without the proper registration.
Ryan Salame Fights Guilty Plea
The United States Attorney’s Office is opposing a petition from former FTX Digital Markets co-CEO Ryan Salame to void his guilty plea in a case involving campaign finance violations. On Aug. 26, prosecutors filed in the US District Court for the Southern District of New York, stating they would respond in writing by Sept. 4 to Salame’s petition for a writ of error coram nobis. Salame’s legal team wants to overturn his plea agreement, which led to a seven-and-a-half-year prison sentence.
Salame claims that during plea negotiations, prosecutors implied they would not investigate his partner, Michelle Bond. However, on Aug. 22, authorities unsealed an indictment against Bond for campaign finance law violations related to her 2022 congressional campaign. The indictment alleges that Bond and Salame conspired regarding funds used for her campaign.
Salame pleaded guilty in September of 2023 to conspiracy to operate an unlicensed money-transmitting business and engaging in campaign finance fraud. This then resulted in a 90-month prison sentence. He is scheduled to report to prison on Oct. 13 after petitioning for a delay due to medical complications from a dog bite. If his petition to void the plea deal is accepted, Salame could face a full criminal trial.
As part of his plea agreement, Salame agreed to pay approximately $6 million in penalties to the government and $6 million to FTX debtors. Although he was named in the same indictment as former FTX CEO Sam Bankman-Fried (SBF), Salame did not testify in SBF’s trial.
Since his sentencing, Salame has been very active on social media, and has been making unsubstantiated allegations against other FTX executives, including former Alameda Research CEO Caroline Ellison.
