The Terrible Outcome of the Telegram Case: Developer Guilt

Author: Liam Kelly; Source: DLNews; Compiler: BitpushNews Mary Liu

Cryptocurrency developers really need to be careful - they are likely to be held legally liable if their work is used by others.

That's the worst possible outcome from France's prosecution of billionaire Telegram CEO Pavel Durov this week, privacy experts said.

Regulators are trying to hold Durov accountable for illegal activity on the Telegram platform, and the case has once again put developers' responsibility for how their products are used in the spotlight.

"My view is that if you combine the Telegram situation with the Tornado Cash situation, it's a double whammy," Taylor Monahan, chief security researcher at crypto wallet provider MetaMask, told DL News.

"It's scary because it holds developers accountable for anticipating and understanding what users are doing and then preventing them from doing it."

Big stakes

Telegram has denied French authorities' allegations of crimes against Durov and said it complies with EU law.

The stakes in this case are huge, especially for cryptocurrencies.

With 950 million users worldwide, Dubai-based Telegram has become an integral part of the digital asset ecosystem by providing a channel for millions of people and businesses to collaborate and communicate.

Smart contracts can’t save them, and from the outset the company has touted its “don’t ask, don’t tell” approach to user activity as a key feature of its business model.

For years, the line where technical product development ends and legal liability begins has been blurred.

Previously in March, a Dutch court convicted Alexey Pertsev, a former developer of cryptocurrency mixer Tornado Cash, of $2.2 billion in money laundering and subsequently sentenced him to five years in prison.

It doesn't matter if Pertsev himself didn't directly launder the money, as long as he managed a website that facilitated such activity.

Now, Durov, 39, who holds dual French and Emirati citizenship, faces a similar situation.

A French court on Wednesday charged Durov with failing to prevent criminals from using the popular social media platform to commit crimes ranging from child sexual abuse to drug trafficking and fraud.

According to the French prosecutor’s statement, Telegram has refused to cooperate with French law enforcement in investigating these crimes and has refused to provide information.

Freedom of Speech

Telegram’s supporters, including Elon Musk, have rushed to frame the case as an undermining of free speech. After all, Telegram’s business model is built on the idea that the platform is an uncensored, open marketplace of ideas, good or bad.

But that idea conflicts with long-standing legal principles that prioritize cooperation with law enforcement over business models, product design, or technical features like smart contracts.

Here, Gary Gensler sure knows how to rile up the industry.

Furthermore, Tornado Cash may actually be in a better position in terms of business model, as it is decentralized and still operates to this day. In contrast, Telegram is largely controlled by Durov and is closer to traditional models such as Whatsapp.

Harry Halpin, CEO of blockchain privacy company Nym Technologies, told DL News: "Both WhatsApp and Telegram are centralized in a set of servers, and the company responsible has absolute control over these servers."

This makes it easier for management to review illegal or offensive content, as well as to shut down or censor accounts.

'Difficult to detect'

Halpin said that because WhatsApp and Telegram are not open source, meaning their code is not publicly visible, governments could potentially spy on users. “It’s very hard to detect,” he said.

While fears of state surveillance have long animated crypto culture, prosecutors appear to have finally drawn a red line.

At Pertsev’s trial, a Dutch judge reprimanded the developer for not responding to authorities seeking information or action about the mixer’s illegal behavior.

“It’s scary and roughly equivalent to the government requiring every developer to become a highly censorship-resistant Web2 company from day one,” Taylor Monahan, lead security researcher at MetaMask, told DL News.

Crypto Channels

For an industry that prides itself on decentralization, Telegram’s role is crucial. OTC markets, such as Offx and SecondLane, are built directly into Telegram.

Evangelism and marketing for emerging projects heavily rely on TG Groups to reach audiences, and the messaging app integrated crypto wallets and in-app crypto payments this year.

“Telegram is no longer just a messaging platform,” Reuben Yap, administrator of privacy project Firo, told DL News.

As the case progresses, Telegram’s fortunes and market position may shift.

Monahan said the case has already caused considerable damage, saying: “This is a very bad thing that will cause immeasurable damage to personal freedom and privacy.”

As precious as these crypto ideals may be, law enforcement authorities seem intent on drawing a line, prioritizing fighting organized crime far above the so-called ethos of the crypto industry.