On January 13th, a federal court ruled that Telegram has until February 26th to turn over its banking records to the SEC via the court system. Courts had previously denied the SEC access to banking records, in order to comply with foreign banking regulations. Now, in order to comply with those regulations, parts of the records will be redacted.
Telegram has decided to comply with the order in full, saying that it will only redact records before submitting them to the public archives. The company also says it will comply by January 15th, well before its required date of February 26th.
The question now, of course, is whether the SEC finds anything in the unredacted records it will be receiving. The agency has already alleged that Telegram ran its $1.7 billion ICO as an unregistered security, and believes it will find records within the banking statements to support its claims.
Telegram must believe the records will do quite the opposite. Why else would they comply so fervently with the demands of the SEC?
Further, the company had previously fought to keep parts of the records redacted, but has now said that it will give unredacted copies to the federal agencies. It won’t redact them until they get entered into the public record.
The Case Against Telegram
Telegram first came into the crosshairs of the SEC back in October. At that point, the regulator began to suspect that Telegram’s Telegram Open Network ICO had in fact been a security. One piece of evidence that the regulators have recently pointed to is third-party invoices that indicate people were paid to sell the tokens.
Telegram believes it qualifies for certain exemptions under US regulations, but the regulator does not agree. One such exemption is called Regulation D, which would mean that Telegram doesn’t have to register its offerings. Telegram doesn’t necessarily qualify on certain grounds, such as offering strictly to “accredited investors,” which Telegram didn’t do.
Telegram ran a massive ICO, but has yet to put out a blockchain product. The blockchain continues to see delays, and the company has said it won’t interface directly with the Telegram client, among other drawbacks.
One reason that so many have invested into the GRAM tokens is the prospect of having a blockchain platform with so many built-in users. Lacking the Telegram user base, the thing seems a dud.
Whatever happens, the case against Telegram, or for it, will be progressing some this week.