SEC pushes again for Telegram data regarding investor funds

Maria Nikolova

The regulator renews its motion to compel Telegram and TON Issuer to produce certain bank records.

Several days after the New York Southern District Court denied a motion by the Securities and Exchange Commission (SEC) to compel the production of full bank records by Telegram and TON Issuer, the regulator has renewed its attempts to obtain the data.

As per documents filed with the Court on January 10, 2020, and seen by FinanceFeeds, the SEC is renewing its motion to compel the defendants to produce certain bank records. On January 6, 2020, the Court denied without prejudice the SEC’s first such motion but ordered Telegram and TON Issuer to file a declaration setting forth a proposed schedule for a review of the requested records to ensure that production of such records complies with foreign data privacy laws, The defendants have since filed an affidavit, which the SEC says is vague as it makes it impossible for the SEC or the Court to weigh the true nature of the supposed burden of complying with foreign data privacy laws.

Telegram first asserts, generally, “that there are foreign persons identified in the [requested banking records]” and that producing them in this action “may implicate applicable foreign data privacy laws.” The defendants then complain that the analysis would include “determining the jurisdiction of each of the approximately 770 entities or individuals identified in the Records, and the nature of the relationship with each, to assess the extent to which foreign data privacy laws may be implicated.”. The defendants next state that fourteen jurisdictions are implicated for the 76 out of 770 entities or individuals whose jurisdiction they have already identified, that they have “already . . . performed” the data privacy analysis with respect to twelve of those jurisdictions, and that they have not done that work for the other two. The defendants further conclude that they “may need to engage local counsel to conduct legal analysis of related data privacy issues” with respect to these jurisdictions.

According to the SEC, Telegram has not provided sufficient information for the Court to determine whether a review for compliance with foreign data privacy laws is necessary. The regulator says that Telegram has failed to provide information regarding the current location of the records, the original location of the records, and the original, intervening, and current custodian(s) of those records, all of which is necessary to the conflict-of-law analysis. The SEC stresses that Telegram does not even mention the names of the foreign countries whose laws might apply, nor does it cite any specific data privacy laws.

“Telegram’s vague submission reveals Telegram’s broad, amorphous invocation of “data privacy” for what it is – a smokescreen aimed at improperly withholding relevant, responsive documents from the SEC”, the regulator says.

In its original motion, the SEC noted that the defendants claim to have raised approximately $1.7 billion from investors through the sale of digital tokens called Grams between approximately January through March 2018 in what the SEC has charged to be an unregistered offering of securities. The SEC argued that the defendants – Telegram and TON Issuer refused to disclose the bank records concerning how they have spent the $1.7 billion they raised from investors in the past two years and to answer questions about the disposition of investor funds.

According to the SEC, the requested bank records are highly relevant to the issues in dispute in the case, including how much money Telegram has spent, and in what manner, in developing the TON Blockchain, the Telegram Messenger application to be integrated with the TON Blockchain, and related applications. Also, the evidence is seen as relevant to the efforts Telegram has made to ensure the viability and profitability of the Grams it sold.

Further, according to the SEC, Telegram’s bank records are relevant to whether Telegram paid commissions to purchasers who were buying Grams to resell to other investors, which could render them statutory underwriters.

Read this next

Digital Assets

Crypto.com expands its presence in Turkey with new products

Crypto.com, a Hong Kong-based cryptocurrency exchange platform, is set to accelerate its growth in Turkey, singling out the country as a market with huge potential.

Digital Assets

Binance buys Japanese crypto exchange Sakura BitCoin

Binance, the world’s largest crypto exchange by traded volume, has made a fresh bid to enter Japan with the acquisition of Japanese-registered crypto exchange service provider Sakura Exchange BitCoin (SEBC). The financial terms of the transaction were not disclosed.

Industry News, Inside View

Viacheslav Taran: FX and Crypto industry mourns death of Libertex Group co-founder

FinanceFeeds reports with great sadness that Viacheslav Taran, Co-Founder of Libertex Group, passed away last Friday. 

Digital Assets

FTX founder SBF called to testify by Texas regulator

The Texas State Securities Board (TSSB) has called on Sam Bankman-Fried to testify during an administrative hearing scheduled for Feb. 2, 2023. The move marks yet another expansion of enforcement agencies’ probes into FTX’s activities following its insolvency.

Digital Assets

Despite FTX chaos, Italy welcomes crypto lender Nexo

Crypto lender Nexo has won regulatory approval from Italy’s financial regulators, allowing the exchange to continue serving Italian customers.

Institutional FX, Interviews

ION Markets for execution and clearing: Francesco Margini at FIA EXPO 2022

The CPO of Cleared Derivatives at ION Markets spoke about the need for automated execution and clearing in times of surging volumes and increased volatility.

Institutional FX

FIA EXPO 2022: Baton Systems President on building post trade rails for capital markets

As the world’s largest trade show for the listed derivatives dealers, the FIA Futures and Options Expo is a high point for the global cleared swaps community, with dozens of panels, educational sessions, networking opportunities and more.

Inside View

Olga Taran releases public statement in Monaco regarding “false accusations” against her late husband Viacheslav

Vyacheslav Taran, 53, founder of Forex Club and CEO of Libertex Group, was the sole passenger of a helicopter that crashed in Villefranche-sur-Mer this weekend. The helicopter crash is still under investigation, and authorities have not indicated any possibility of foul play.

Industry News

Brokeree Solutions Wins the “Best Emerging Fintech” Award

2022 has become, for Brokeree Solutions, a time of new inventions and developments. We are pleased that the industry has appreciated this emergence of new technologies

<