Court order slows down SEC bid to obtain Telegram banking records tied to token sale

Quick Take

  • A court in New York has rejected the SEC’s attempt to compel Telegram to share full “bank records” related to its token sales worth $1.7 billion
  • There is, however, an option that the SEC will get access to at least some of the requested information

The New York Southern District Court denied without prejudice the Securities and Exchange Commission’s (SEC) emergency request to get complete bank records from Telegram related to its token sales, ordering the messenger app maker to provide “a proposed schedule for a review of the requested bank records to ensure that production of such records complies with foreign data privacy laws.”

FinanceFeeds reported the news Tuesday, saying that the court held a telephone conference with the parties on Monday and Judge P. Kevin Castel signed an order denying, without prejudice, SEC’s letter motion to compel. 

There is an option that the SEC will get access to at least some of the requested information, per the report. Telegram reportedly has time until Jan. 9 to submit 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 SEC had urged the court to compel Telegram to provide documents, 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.” The SEC said at the time that these records are “highly relevant” in the case and that Telegram has refused to disclose financial details. 

The SEC sued Telegram last October for allegedly conducting “illegal” token sales worth $1.7 billion. The case has been ongoing since then. Telegram, on its part, has refuted all the allegations made by the SEC. The company recently claimed that "if and when" Gram tokens launch, "they will constitute a currency and/or commodity – not securities under the federal securities laws.”

Telegram's TON blockchain network was originally scheduled to go live on Oct. 31, but the company recently said that the SEC lawsuit made the launch timing “unachievable." It, therefore, wanted to push the deadline for the TON launch to April 30, 2020. Investors agreed on the postponement and did not demand money back from Telegram.

Just yesterday, Telegram said that the TON Wallet won’t be integrated with the company’s popular messaging app at launch. It also stressed that the TON  blockchain network will operate independently from Telegram after launch.

Editor's Note (1/7/2020, 2:50 p.m. EDT): This story and its headline have been edited for clarity to better reflect the nature of the court order. 

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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