TON cryptocurrency "evaporates" billions of dollars after Telegram CEO is arrested

According to Coinmarketcap data, the TON cryptocurrency traded steadily at $6.8 for several days before plummeting to $5.44 and recovering slightly to $5.7-5.8 this morning. The cryptocurrency's market capitalization has now "evaporated" about $2 billion, from $16.6 billion to $14.44 billion.

Other blockchain projects built on this ecosystem also saw similar declines. GameFi's Tap-to-Earn Notcoin (NOT), which runs on TON, also fell 18% while Pavel Durov's memecoin, codenamed Durev, also fell around 20%.

Toncoin is a cryptocurrency built on Telegram's blockchain. However, in 2020, the company had to stop the project after facing pressure from the US Securities and Exchange Commission (SEC).

Originally called Telegram Open Network (TON), it was developed by Telegram CEO Pavel Durov and his brother Nikolai in 2018. A year later, the SEC ordered Telegram to stop selling Grams - the token linked to the TON blockchain - due to problems related to the company's $1.7 billion fundraising.

After Telegram abandoned the TON project, a group of developers continued the work and renamed it The Open Network, while Gram became Toncoin. In fact, the project still has close ties to Durov's messaging platform, serving many functions in the ecosystem, including transaction fees and governance.

The volatility in TON’s price following Durov’s legal troubles highlights the challenges blockchain projects face when they are closely tied to high-profile individuals. While Telegram has positioned TON as an independent ecosystem, the market reaction suggests that investors still consider Durov’s involvement important to the token’s value.

At around 8:00 p.m. on August 24, TF1 TV channel cited an anonymous source as saying that Durov was arrested at Paris-Le Bourget airport, a suburb of Paris, after arriving from Azerbaijan by private plane.

OFMIN, the French agency responsible for preventing violence against minors, issued an arrest warrant for Durov, alleging that Telegram lacked sufficient moderators and was not cooperating with authorities. Police believe that this situation, along with Telegram’s encryption features, allowed criminal activity to go unchecked, making Durov an accomplice in drug trafficking, cyber violence, fraud, organized crime, and inciting terrorism.

Pavel Durov is estimated by Forbes to be worth $15.5 billion. He announced earlier this year that Telegram has 900 million monthly users, up from 500 million at the start of 2021.