Telegram's Legal Battle With the SEC Heats Up Over TON Bank Records

Although an initial court decision seemed to have allowed Telegram to maneuver around the request by the SEC to provide the company's banking records, that decision has since been reversed.

Aside from the impact that Telegram winning its legal case with the SEC could have on future approval for crypto-related projects in the United States, the battle between regulators and Telegram takes place against the backdrop of seismic changes within the industry.

Telegram filed under a 506(c), an exemption that permits companies to advertise and avoid SEC registration if securities are sold to accredited investors alone.

A letter to the court from Pavel Durov's attorneys states that Telegram agreed to provide the SEC with these records no later than Jan. 15.

"What it signals is that the court agrees, at least at this time, with Telegram in that the SEC brought a non-fraud case against them within essence one legal question: Did the offering of the Gram constitute a 'security' under the Howey Test. This case does not involve any allegations of fraud or that Defendants misrepresented how they would use the funds raised. The court is denying the typical massive scope of SEC discovery, which ordinarily involves vast financial requests."

"From a judicial standpoint, Telegram had previously provided information related to the TON platform and the SEC's request was likely considered just too broad because the SEC was seeking every bank record from Telegram reflecting every single transfer or payment to or from Telegram during the time of the private placement up until now. The judge denied it without prejudice, meaning the SEC could request that information again later."

The struggle for Telegram's bank records aside, the firm also issued a series of summaries about TON on the same day as the court's initial ruling.

"One of the reasons [Telegram] did not want to produce bank records, which are located abroad and reflect payments to non-U.S. parties and individuals, Telegram would have to conduct an extensive review and redaction process to comply with foreign data privacy laws. Telegram argued that the process is time-consuming and expensive and ultimately unnecessary given the limited relevance of the information sought."

Throughout its legal fracas with the SEC, Telegram has maintained that Gram tokens are not a tool for investment.

Despite Telegram CEO's penchant for operating outside of the limelight - a behavioral pattern mirrored by the company he founded - Pavel Durov has reportedly given a deposition along with two other Telegram employees.