Telegram thought it had won a small skirmish in its large battle with the U.S. Securities and Exchange Commission (SEC) recently when a court agreed that it didn’t have to turn over bank records. That decision was an effort by the courts to review the data that could be released, and it was known that Telegram, which is fighting SEC over the alleged sale of unregistered securities tied to its GRAM cryptocurrency, might have to eventually turn over the data, anyway. That day has now come.
Federal Judge Kevin Castel is presiding over the case and gave Telegram its break just a few days ago. However, he has now reversed course, explaining in the court order, “In light of the parties’ arguments presented in their letters and during the January 6, 2020 telephonic conference, the Court orders defendants to produce the requested bank records. The bank records may be produced under a Confidentiality Order. Only redactions necessitated by foreign privacy laws shall be permitted and a log stating the basis for any redaction shall be produced at the time the redacted documents are produced. Defendants shall produce the bank records on a rolling basis and shall complete production by February 26, 2020. The Court does not anticipate extending this date nor the existing schedule for the motions for summary judgment or for a preliminary injunction.”
Telegram had argued that the request for the records was invalid and an exaggeration of the SEC’s scope of power. However, Judge Castel disagreed and determined that, per the court’s guidance, Telegram didn’t offer a substantial defense against the request.
The SEC is going after Telegram, arguing that the sale of the GRAM crypto was an illegal securities offering, a claim Telegram has vehemently denied. However, the commission has recently stated that it can now produce evidence supporting its case against Telegram, which could potentially cause significant issues for the social media company and its plans for the Telegram Open Network (TON). Telegram asserts the sale of GRAM was tied to only private placements, which would make them exempt from the SEC’s securities reporting regulations.
Telegram now has until February 26 to turn over the financial records. It has the authorization to redact certain details tied to foreign privacy data disclosure laws, but not to the crux of the pertinent financial information.
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