French authorities detain Telegram founder, raising concerns among encryption investors

The recent detention of Telegram founder Pavel Durov in France has caused quite a stir in the cryptocurrency investment circle. Several well-known institutions have invested in the digital token Toncoin, which is closely related to Telegram, and now face potential risks.

It is reported that more than ten institutions, including Pantera Capital Management, Animoca Brands, and Mirana Ventures, have invested in Toncoin. Telegram uses its blockchain to handle transactions such as instant payments. According to reports, the large encryption venture capital firm Pantera invested over $100 million in Toncoin earlier this year.

Investors are attracted by the prospect that Telegram may evolve into a "super app" for digital assets similar to WeChat, with its 900 million users relying on Toncoin for various activities ranging from payments to blockchain games. From February to early July this year, the price of Toncoin quadrupled, and the total locked value on its underlying blockchain, TON, once exceeded 1 billion dollars.

However, Durov was detained for being accused of insufficient efforts in combating criminal activities on Telegram, exposing related risks. On August 29, Durov was charged with participating in the dissemination of child pornography and engaging in drug trafficking and other illegal activities on the app. Telegram stated that it complies with European laws.

After Durov was arrested on August 24th in the suburbs of Paris, the price of Toncoin plummeted by about 20%, and then partially recovered. Data shows that the total locked value of the TON network has fallen to 573 million USD.

The founder of the encryption investment firm 1kx, Lasse Clausen, stated: "Most investors believe that the Telegram app itself will significantly promote the adoption of the Toncoin network. However, the company and its founders are now facing a black swan event, which may raise doubts about the future."

Venture capital institutions investing heavily in Toncoin, (, usually commit to not selling tokens for at least a year. ) is assessing whether France's actions against Durov will lead users to leave Telegram. The app is highly favored in the encryption circle, largely due to its lenient regulatory policies, which have also embroiled Durov in legal disputes.

Pantera stated that Toncoin is its largest investment, but did not disclose the specific amount. The TON Foundation stated that it has never raised funds. Animoca Brands did not comment on its investment, and Mirana Ventures also did not immediately respond to the request for comment.

Some Toncoin supporters see this as an "opportunity". Eugene Ng, co-founder of DWF Labs, which provides market-making services for the token, stated that the company spent "millions" of dollars on the open market to purchase the token after the price of Toncoin plummeted.

Investments in projects like TON by venture capital firms are referred to as "token trading," where investors acquire tokens instead of traditional stocks. To facilitate this, venture capitalists often establish special instruments such as "liquid funds" to hold assets for shorter periods. Since most token trades are conducted one-on-one, it is difficult to accurately estimate their popularity.

For venture capital and its investors, the main advantage of token trading is a quicker exit. A common pattern is that tokens begin to unlock after 12 months, after which they can be gradually sold. 1kx founder Clausen pointed out that the price volatility of tokens also allows supporters to gain a more comprehensive understanding of project progress.

Token trading often involves significant discounts. It is reported that Pantera purchased Toncoin at a price 40% lower than the market price at that time. Based on an average price of $6.32 announced in May for the transaction, this investment is still profitable.

Pantera's lock-up period is one year, after which Toncoin can be sold in batches over several years.

Another characteristic of token investment is that the assets are extremely volatile, and any problems will become immediately apparent. Funds usually value their held assets periodically based on market value, meaning significant declines will be directly reflected in reports to limited partners.

The collapse of Do Kwon's TerraUSD stablecoin project in May 2022 fully demonstrated this risk. Just a few months earlier, investors including Three Arrows Capital and Jump Crypto had just purchased over $1 billion in Luna tokens to stabilize TerraUSD. After the collapse of TerraUSD, Luna became worthless. Subsequently, Three Arrows went bankrupt, triggering a chain reaction in the encryption industry.