Court quashes SEC move to make Telegram submit bank records

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A court in New York has denied a bid from the Securities and Exchange Commission (SEC) to force Telegram to submit bank statements, as part of an investigation into the firm’s use of investor funds around its TON token.

The New York Southern District Court quashed the claim for the regulator on January 6, after Judge P. Kevin Castel refused to accept the SEC’s Letter of Motion to Compel, FinanceFeeds reported. The matter was addressed in a telephone meeting between the parties on the same day.

In its motion laid before the court, the securities regulator said that Telegram had raised some $1.7 billion from investors to March 2018 for the sale of its digital tokens, in what the SEC believes to be an unregistered offering.

The SEC argues that Telegram has refused to thus far make financial statements available concerning its use of the funds raised, and has to date failed to answer its questions on how the funds have been managed.

The SEC motion says the information contained in the company’s bank statements is material to the case in question, and to determining whether breaches of relevant securities laws have occurred.

The regulator also wants to establish whether Telegram has paid commissions to purchasers of its tokens for resale purposes, which would bring them into the regulatory remit of laws pertaining to statutory underwriters.

The court ruling means Telegram will not have to disclose the bank statements or answer the questions posed by the regulator at this time. However, the firm will still be expected to provide access to some information as part of the ongoing discovery process in the lawsuit.

At present, Telegram has until January 9 to set forward a schedule for reviewing its financial records, and for ensuring any disclosures comply with data protection laws in both domestic and relevant foreign jurisdictions.

While the ruling is seen as a setback for the SEC, its legal efforts to investigate the actions of Telegram over its token issue continue.