Mobile messaging giant Telegram has agreed to release its financial records as part of an ongoing battle with the United States Securities and Exchange Commission (SEC) over its planned token offering.
The move was made public in a filing with the Court of the Southern District of New York (SDNY), which declared that Telegram has until February 26 to provide its bank records to the Court for examination. The ruling made it clear that Telegram will be able to redact any information it deems private, as long as those redactions are in accordance with foreign privacy regulations.
A subsequent letter for the Berlin-based company’s attorneys to the Court expressed their commitment to abide by the ruling, and they claimed that they’d be providing the financial watchdog with their records as early as January 15. As the letter explained, an unredacted record will be submitted to the financial watchdog, while a redacted version will be released to the public.
Telegram Had Put a Strong Fight
The SEC had made previous requests for this information, as a January 2 application claimed that the agency was looking to understand how it spent the funds raised in two separate Initial Coin offerings (ICOs)- fundraising processes where the company is reported to have gotten a combined$1.7 billion from investors.
At the time, the SEC revealed that the financial records of the messaging company would help it as it builds its case, adding that the entire ICO constituted an unregistered securities sale. The agency asked for both testimonies from top Telegram officials and proper documentation, which, as it claimed, will help provide answers as to the sources and use of the funds the company was able to raise.
Telegram immediately went on the defensive, explaining in a letter to the SDNY that the SEC was simply going on an “unfounded fishing expedition.” In the letter, Telegram’s attorneys pointed out that the company’s financial records have no bearing or implication on this case, adding that they’d do nothing but constitute an undue burden on the firm.
“Plaintiff’s letter misconstrues the legal issues in the case and omits critical facts. Defendants respectfully submit that the Plaintiffs motion to compel constitutes an unfounded fishing expedition and should be denied,” the rebuttal letter added.
The SEC Gets Its Wish
The SDNY eventually rejected the application for Telegram’s financial records on January 6, marking what many believed was a definite victory for Telegram at the time. However, the court order also compelled the company to prove that its bank records were in compliance with foreign data privacy laws.
In part, the order read, “The Court denies, without prejudice, plaintiff’s application to compel the production of defendant’s bank records. By January 9, 2020, defendant shall set forth in a declaration a proposed schedule for a review of the requested bank records to ensure that production of such records complies with foreign data privacy laws.”
Now that the SEC has agreed to make its records public and submit them, the ball seems to be in the financial watchdog’s Court. The agency is expected to scrutinize the records dutifully to see if it can nail Telegram on any financial disclosure violations, but barring that, there seems to be no other argument for the agency not to allow Telegram to continue offering a token that’s already been delayed by four months.