The arrest of Telegram founder Pavel Durov has created significant turmoil within the crypto venture capital world, particularly among firms invested in Toncoin, a digital token linked closely to the popular messaging app. Among those affected are major players like Pantera Capital Management, Animoca Brands, and Mirana Ventures, who have all invested heavily in Toncoin. Pantera, one of the largest crypto VC funds, reportedly invested over $100 million into Toncoin earlier this year.
The appeal of Toncoin to investors was rooted in the idea that Telegram, with its massive user base of 900 million, could transform into a “super app” for digital assets, similar to China’s WeChat. This vision saw Toncoin’s value quadruple from February to early July, with the total value locked (TVL) on its blockchain, TON, briefly surpassing $1 billion.
However, Durov’s detention on charges related to facilitating the spread of illegal content on Telegram, including sexual images of children and drug trafficking, has exposed the inherent risks in this investment. The arrest occurred outside Paris on August 24, leading to a roughly 20% drop in Toncoin’s value, though it later recovered some of those losses. The total value locked on the TON blockchain has since fallen to $573 million, according to data from DefiLlama.
Lasse Clausen, founding partner at crypto VC firm 1kx, highlighted the concerns this incident raises for Toncoin’s future. “The majority of the investors thought that obviously the app itself is going to foster and promote, or at least seed, the adoption of the Toncoin network,” Clausen said. “Now we have a case where a black swan event happens to the company itself and its founder — that might raise some questions about the future.”
The impact of Durov’s detention is still unfolding, with venture capital investors now grappling with the possibility that users may abandon Telegram. The app’s popularity within the crypto community was partly due to its relaxed approach to oversight, the very factor that has now led to legal trouble for Durov.
Pantera Capital, which has described Toncoin as its largest investment, has remained silent on the situation. The TON Foundation, which governs the blockchain, has stated that it has never raised money, while other investors like Animoca Brands and Mirana Ventures have not commented on their positions.
Despite the uncertainty, some investors see potential in the market turmoil. DWF Labs, a crypto market maker, seized the opportunity to purchase millions of dollars’ worth of Toncoin after the price drop, co-founder Eugene Ng said.
The practice of investing in projects like TON through “token deals” — where venture capitalists receive tokens instead of traditional equity — is unique to the cryptocurrency space. These deals often involve significant discounts and quicker exits compared to traditional equity investments. However, the volatility of tokens means that when an investment goes bad, the losses are immediately visible.
The risks of such investments were starkly illustrated by the collapse of Do Kwon’s TerraUSD stablecoin in May 2022. Investors who had poured over $1 billion into the project saw their holdings become worthless almost overnight, triggering a chain reaction of failures across the crypto industry.
For now, the future of Toncoin and its investors remains uncertain, with Durov’s legal troubles casting a long shadow over the project’s prospects.
