The Breakdown - Just How Big a Deal is the Arrest of Telegram CEO Pavel Durov?

Episode Date: August 27, 2024

Telegram CEO Pavel Durov was arrested over the weekend. NLW breaks down the news, possible interpretations, and the implications for free speech, technology and more. Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/nathanielwhittemorecrypto Subscribe to the newsletter: https://breakdown.beehiiv.com/ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the Big Picture Power Shifts remaking our world. What's going on, guys? It is Monday, August 26th, and today we are talking about the arrest of Telegram's founder. Before we get into that, however, if you are enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a link in the show notes or go to bit.ly slash breakdown pod. All right, friends, big news over the weekend. I'm sure you are not hearing about this for the first time, but today we are going to look into this story and specifically try to understand all the different explanations, all the different

takes, and try to see what it says for the state of play when it comes to speech, social media, and more. On Saturday evening, Telegram CEO Pavel Dirov was detained by French police at an airport outside of Paris. He was arrested on the tarmac after stepping off his private plane. At this stage, Duraov is still being questioned and has not yet been charged, so we don't know exactly what the allegations are. The AFP reports that an arrest warrant was issued by France's OFMIN, the office tasked with preventing violence against children. The report claims the investigation

relates to a wide range of alleged offenses, including fraud, drug trafficking, cyberbullying, organized crime, and promotion of terrorism. Later reporting attributed the arrest to the National Anti-Fraud Office. An investigator said that Dura, quote, allowed countless offenses and crimes to be committed for which he does nothing to moderate. or cooperate. Either way, most assume the French authorities will attempt to make the Telegram CEO personally responsible for the illicit activities enabled by the Telegram platform. Telegram itself said, Duraev has nothing to hide and travels frequently in Europe. Telegram abides by EU laws, including the Digital Services Act, its moderation is within

industry standards. It is absurd to claim that a platform or its owner are responsible for abuse of that platform. Authorities are confused by Derov returning to France knowing there was a warrant out for his arrest. One official source said, quote, perhaps he had a feeling of impunity. As of Sunday night, Duraov's interrogation was extended by court order. Authorities have a maximum of 96 hours to question him before a judge will decide whether he should be charged or released. There are a wide range of interpretations for Duraov's arrest, ranging from a wholesale crackdown on free speech to much more narrow concerns about specific content and communications. To understand the context properly, it's important to

recognize exactly what Telegram is as a platform and how it has evolved over the years. The platform was launched in 2013 and functioned similar to WhatsApp, offering direct messaging, group chats and file sharing. Initially popular in Russia and the former Soviet Union, its popularity has exploded globally in recent years. For those of you in crypto, you will no doubt be familiar with it as it's one of the, if not the, primary source for private conversations in the sector. The platform now boasts almost a billion monthly active users across the globe, with its largest user base in India. Telegram was promoted as more secure and private than other messaging apps. It's true to an extent, but perhaps misleading in the way most people use the platform.

And end encryption is offered in direct messaging, but not as the default setting. group chats and other features do not offer encryption at all. In practice, this means that most communication occurring on telegram is happening in the clear, and 100% of group conversations are unencrypted. This puts Telegram in contrasts with services like Signal, where major tradeoffs were made to ensure strong encryption by default. It also means there is often a gap between the privacy assumptions made by users and the reality of the platform. Perhaps a more relevant way of thinking about Telegram then is related to content moderation rather than privacy. The platform is notoriously against censorship of any kind. They have occasionally buckled

to public pressure and taken down content related to extremist groups, but generally the bar for removal of content is extremely high, and content moderation is largely absent from the platform. Telegram is also famously resistant to requests from law enforcement. While most content is stored unencrypted on telegram servers, the platform has an extremely high bar for releasing user data. According to their privacy policy, Telegram will only disclose IP addresses and phone numbers if they receive a court order related to a terrorism suspect. They claim this has never happened. More practically, Telegram refuses to participate in the more casual sharing of user data with law enforcement that has become common for Western platforms. Privacy advocates have been

raising the alarm about the dangers of using Telegram for years, as most of the traffic was recorded by the company, meaning there was a sense that it was only a matter of time before governments found the required leverage to gain access. So let's now move into discussions about what this might mean. One take is that this is free speech under attack. Edward Snowden tweeted, the arrest of Dürov is an assault on the basic human rights of speech and association. I am surprised and deeply saddened that Macron has descended to the level of taking hostages as a means for gaining access to private communications. It lowers not only France, but the world. Similar views were expressed by Bologi Shrinivasa and a wide cross-section of crypto-thought

leaders. The concern is not just that internet-based free speech is under attack, but specifically that Western democracies can no longer be counted on to champion free speech. This sentiment has been building for several years and hit a crescendo recently regarding Elon Musk and X. Earlier this month, the UK Police Commissioner threatened to extradite Musk over posts related to racial tensions and rioting. In the same week, a European commission official wrote to Musk to remind him of his responsibilities to censored disinformation during the Trump conversation. Tucker Carlson, who recently hosted Dirov's first interview in almost a decade, framed this as being explicitly about Western censorship. He tweeted,

Pavel Dirov left Russia when the government tried to control his social media company telegram. But in the end, it wasn't Putin who arrested him for allowing the public to exercise free speech. It was a Western country, a Biden administration ally, and enthusiastic NATO member that locked him away. Pavel Dirov sits in a French jail tonight, a living warning to any platform owner who refuses to censor the truth at the behest of governments and intel agencies. Part of the tension on display is that in many cases Europeans and Americans have different views on what free speech means. For Americans, free speech is viewed as being inherently about the protection of individuals from the government. The widespread view is that the government should have no ability to limit speech that is merely

objectionable. The concept has become muddier over the years, but the guidance is the guidance is The guiding principle is that free speech is sacrosanct in U.S. culture. This principle is also the foundation of Section 230 protections, which provides that internet platforms are generally not liable for the conduct of their users. The EU doesn't have similar legal protections for internet platforms and has a very different social concept of free speech in general. Free speech is still regarded as a fundamental human right, but the bar for government intervention is much lower.

As one example, the European Union required the criminalization of hate speech in 2008, a concept that has been consistently rejected by the U.S. Supreme Court. Lurian Glatz, the head of policy at the European Crypto Initiative, explained it like this. In the EU, freedom to speak, act, whatever, comes with responsibilities. If you're running a public comms platform, then you're creating an opportunity for people to use it for crimes. Your responsibility is now to do the best you can, up until some thresholds such that crimes don't happen on your platform. If this really is all about the gulf between U.S. and European views on free speech, many wonder if the internet could change that dynamic.

Shriram Krishnam, a general partner at A16Z tweeted, between Pavel's arrest, the free speech debate last month, and AI regulation and safety issues between the US and EU, we are entering a very different era for international tech policy. Heraldore Thor Leifson and Icelandic tech mogul commented, laws in each country are different. With globalization, especially in tech, it's actually surprising more CEOs don't get arrested when they travel. There's also a sense that the crypto industry has dropped the ball on decentralized social media and might have missed its window to protect free expression on the internet. Glatz again commented, can we talk about the market failure that has led to absolutely no-one funding teams that could have built us a Web3 native,

alternative to Telegram and Discord? Then again, a key thing to understand about this issue is that unregulated speech on the internet is not as popular outside of our industry. Guy Verhofstadt, the president of European Movement International, tweeted, Telegram sits at the center of global cybercrime. Free speech is not without responsibilities. Hello, friends, before we get back to the rest of the show, I want to implore you to join me at Permissionless. Permissionless is the conference for Cryptonatives by Cryptonatives, and the reason it's so important this year is that despite regulators' best attempts to push industry founders, devs, and executives out of the U.S., the United States remains the beating heart of

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the 11th, and tickets are just $499. If you want to get 10% off, use code breakdown 10. Go to the blockworks website, blockworks.co. There will be links to register for the conference, and again, you can use code breakdown 10 to get 10% off. Let's talk about a couple other takes, though. One other important piece of context is how Durov himself fits into the story of Russia over the past decade. Duraov is often thought of as the Russian Mark Zuckerberg. His first major platform was launched in 2006. Known as VK, the Facebook clone is the 30th most visited website in the world. In 2014, surrounding the annexation of Crimea, Duraov was dismissed as CEO.

He claimed the platform had essentially been seized by Putin allies after Duraov refused to identify Ukrainian protesters. At the time, Duraov said, to give the personal details of Ukrainians to the Russian authorities would not only be against the law, but also a betrayal of those millions of people in Ukraine who trusted us. The freedom to disseminate information is a an inalienable right of a post-industrial society. Dharov then left Russia to start Telegram, stating, "...unfortunately, the country is incompatible with internet business at the moment. He test drove cities including London, Berlin, Singapore, and San Francisco before settling in Dubai, which he praised for its neutrality. In 2021, D'Rov obtained citizenship in both the UAE and

France. Relations with the Kremlin remained frosty as the platform rose to prominence in Russia and former Soviet states. In 2018, Telegram refused to hand over encryption keys to the Russian Secret Service. A court order was issued to block action. access in Russia, and enforcement of the ban involved blocking over 19 million IP addresses, many of them associated with major Western cloud platforms that route Telegram data. This caused a huge amount of collateral damage bringing down the MasterCard network and a number of other critical internet services. Although Russian citizens evaded the ban using VPNs, it remained in place until 2020 when Telegram assisted with investigations into extremist groups. Following the 2021 invasion of Ukraine,

Telegram played a key role as the communications and propaganda platform. Both the Russian and Ukrainian governments use the platform to spread news and misinformation. A recent survey found that 69% of Russians use telegram as their main source of news. Similar is true for Ukrainian nationals, with the government official recently calling the platform the largest resource of information in Ukraine. The platform is even sometimes used for military communications. This is especially common for the Russian paramilitary organization, the Wagner Group. On hearing of Dharov's arrest, former Russian president Dmitri Medvedev wrote, Once quite a long time ago, I asked Derov why he did not want to cooperate with law enforcement

agencies on serious crimes. This is my principled position, he said. Then there will be serious problems in any country, I told him. He decided that his biggest problems were in Russia and he left, and then also received citizenship and resident permits in other countries. He wanted to be a brilliant man of the world who lives well without a homeland. He miscalculated. For all our common enemies now, he is Russian, and therefore unpredictable and dangerous,

of a different blood. Definitely not Musk or Zuckerberg, who, by the way, actively cooperates with the FBI. Dharov needs to finally understand that one does not choose one's fatherland, just like one does not choose one's times. So given all that, is it possible than rather than being about the suppression of free speech, Dharov's arrest could be a geopolitical chess move? When he landed in France, he was returning from meetings with the government of Azerbaijan in the capital of Baku. Unofficially, Durav was rumored to be seeking a meeting with Russian leader Vladimir Putin, who was also on the ground in the city. The meeting apparently never took place, but the rumor is still

mysterious. Following Ukraine's successful push into Kursk earlier this month, the Kremlin has been limiting access to YouTube and WhatsApp. Oh, and Mavis. Matthews, a journalist with the spectator, wrote, there is speculation that Duraov may have been attempting to persuade Putin to leave Telegram alone, but the Russian leader refused to meet him. The fact that Duraf flew from Baku to Paris in his private plane, knowing that the French had a long-standing warrant out for his arrest, is one of the unanswered mysteries of this story. There is some chance, then, that Duraev has knowingly turned himself over to the French authorities as a form of defection. While Dorev has maintained he is independent and neutral to both

Russia and the West, there is speculation that cooperation with Moscow has increased since the invasion of Ukraine. In February 2023, Wired reported on a widespread crackdown on Russian dissidents. During raids on their homes, the dissidents claimed that SFB officials read their telegram messages back to them with the implication that they had real-time access. Telegram claimed that the platform was secure and that they were not collaborating, instead suggesting that the FSB had hacked the dissidents' phones. So, if this really is a high-stakes defection, might we see a deal struck that grants Western

officials access to the information they're looking for? In other words, not drug dealers and terrorists, but communications for the Russian army. All servicemen and administrative staff have already been warned to stop using the platform. Pro-war Russian channels are also gripped by panic. A war blogger Alexi Sukonkin wrote, Telegram is currently the basis of our military communications. From now on, everything is in jeopardy. Another, named Roman Alokine added,

As soon as Dharov hands over the keys to telegram and it's only a matter of time, and in the absence of effective communications tools, our army will become even more vulnerable. Riber, a channel with ties to the Russian Ministry of Defense, wrote, the French police have arrested the head of the primary means of information exchange within the Russian armed forces. They're taking away our only more or less normal means of communication. Now, it might seem crazy to think that the Russian war effort is being coordinated on Telegram, from top state officials right down to battle-line communications, but signs seem to point to that

having more than a kernel of truth. Gary Kasparov, chess grandmaster, and Russian defector, tweeted about Derov's arrest, but my first thought is not dependent on supposition or motivations. As admitted by Kremlin propagandist, telegram is widely used by the Russian bureaucracy and military, so it has been used for acts of war and war crimes in Ukraine. This is war, and attempts to protect a genocidal invasion behind free speech is a disgrace to the term. There will be due process, unlike in Russia, that so many pro-Kremlin forces instantly rallied against his arrest is also telling. Dharov's personal loyalties or positions are secondary for now. What we know for certain is that there are sanctions against Russia, against materially enabling its unprovoked

war on Ukraine. Rushing to his defense is misguided at best. Still, with all of these takes running hot, it is very easy to ignore the simplest possible explanation. In that case, that might be that Telegram refused to abide by content moderation standards. And so beyond the terrorism and the drug trafficking, the drive to arrest her off could come down to old-fashioned internet privacy. Back in March, a Spanish judge ordered the shutdown of Telegram after they were found to have hosted the illegal broadcast of a soccer match. This problem has become endemic for French soccer as well. Reports claimed that 200,000 tuned into an illegal telegram stream last week to watch Paris San Germain. Passes to watch football legally have risen to 45 euro per month, an amount that is

driving many to pirate the matches. Now, of course, this would be an incredibly mundane reason to shut down an internet platform of this size, but historically we've seen far more platforms shut down for content piracy than anything else. One of the big implications of all of this has to do with liability. Legendary, if eccentric investor Tim Draper wrote, this is outrageous and furiating. Are all great entrepreneurs suddenly responsible for every bad thing anyone has done with their product? This is a dangerous precedent. His Starbucks responsible for everyone who has done something unlawful after they drink coffee. Is Apple responsible for every indiscretion anyone has had with an iPhone?

France, release this man. Now, whatever you think about the answer to this particular question, I can guarantee you that it is going to take on increased significance in the age of AI. This is a central point of debate when it comes to AI regulation, given how concerned people are about the types of extreme uses that generative AI could enable. It's what makes this conversation even more important now than it ever has been in the past. At this stage, we wait for an actual explanation. And I think what that explanation says will have a huge impact on exactly what the implications are for the broader world. I will, of course, keep close to this as the story evolves, and we'll bring you an update as soon as we have it. For now, though, that is going to do it for today's breakdown.

Appreciate you listening as always. And until next time, be safe and take care of each other. Peace.