According to a court order dated Monday, federal judge Kevin Castel ordered encrypted messaging app Telegram to disclose its bank records by February 26. The decision comes a few days after the same judge informed the Securities and Exchange Commission that it would not be given full access to Telegram ICO’s banking and financial details.
Telegram has to present a schedule for the review of its financial information as the court doesn’t plan to extend the deadline. The legal notice further reads:
"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," the notice says.
"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."
Earlier this month, the SEC requested the Southern District of New York Court to pass a motion forcing Telegram to turn over a number of documents pertaining to its Gram token sale, which raised $1.7 billion from accredited investors, many of whom US citizens.
Although the agency claimed that the information was central to its investigation of Telegram’s ICO, the judge limited the scope of the documents the messaging app must produce. But while Telegram's lawyers wanted the SEC request to be thrown out, calling it an "unfounded fishing expedition," the watchdog was granted access to limited financial information to the extent necessary for its investigation.
Evidence of post-ICO sales
Telegram argued that its bank records comply with foreign data privacy laws, but the SEC renewed its request and stated that "Telegram does not even mention the names of the foreign countries whose laws might apply, nor does it cite any specific data privacy laws.”
Further supporting its request, the SEC said it obtained evidence of post-ICO sales, which undercuts the argument that the token sale was exempt from registration requirements. The US regulator said Gram tokens were sold after completing its ICO, and two companies already invoiced Telegram for commissions from selling the Grams, months after the controversial initial coin offering concluded.
Telegram had reportedly sold its Gram virtual coins in two private funding rounds, with proceeds going towards the creation of a decentralized network for the app. At the time, Telegram already reported to the SEC that it had raised the funds in private placements, which were used to develop TON Blockchain . Since the ICO excluded retail investors, the firm claimed an exemption from US requirements to register their tokens as a security until the SEC has stepped in to halt Telegram crypto ambition.
