Telegram Bemoans Compulsion to Ensure Financial Data Compliance

Mobile messaging giant Telegram is fighting back against the United States Securities and Exchange Commission (SEC), as it gives in to the demands of the financial watchdog’s attempts to get a hold of its financial records. Yesterday, Telegram’s attorneys published a filing in which they explained that to get their financial records, they’ll need to comb through data protection regulations in several foreign jurisdictions, in a process that could very well take months to get done.

Conflict Moves Into the Scope of Finances

The financial records have been the latest topic of contention in the case of Telegram and the SEC, after the financial watchdog accused the London-based tech company of having issued unregistered security. On January 2, the SEC filed a court order seeking to compel Telegram to release the details of how it spent the total $1.7 billion it raised off two Initial Coin Offerings (ICOs) a couple of years back.

The SEC explained that the records were highly relevant to the case it was building against Telegram, as it alleged that the company had gotten those funds from selling unregistered securities. Thus, it sought to procure a series of documents to build its case. These include its ICO documentation, sworn testimony from Telegram and staffers relating to the funding, and how the funds were spent.

“Defendants are now refusing 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,” the SEC alleged.

Telegram pushed back two days later, calling the effort no more than an “unfounded fishing expedition” and accusing the financial regulator of intentionally wanting to drag the case longer than it needed to be.

More Requirements Will Halt Telegram’s Plans

On January 6, the United States District Court for the Southern District of New York announced in an official filing that it would deny the request to take a look at Telegram’s financial records. However, while it didn’t have to provide its financial information, the court did explain that Telegram would need to prove that its bank records were in compliance with foreign data privacy laws.

“The Court denies, without prejudice, the plaintiff’s application to compel the production of defendant’s bank records. By January 9, 2020, the defendant shall set forth in a declaration a proposed schedule for a review of the requested bank records to ensure that the production of such records complies with foreign data privacy laws,” the release read in part.

Speaking on the resolution, Telegram explained that ensuring proper compliance with all foreign data privacy laws would require an in-depth analysis of about 4,600 transactions, all of which involved about 770 different people and entities. A preliminary sample of about a tenth of these entities would have implicated 12 separate foreign jurisdictions alone with which it had worked with, as well as two that it hadn’t gotten in contact with its prior work.

As the company estimated, analyzing all of these transactions would require at least 2 months of work. It’s expected that this compulsion could have a lasting impact on the resolution of the case- which was initially expected to be tried in February.

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