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Telegram to produce bank records in ongoing Gram ICO case with SEC

Tue, 14 Jan 2020, 09:42 am UTC

A U.S. court has ordered Telegram to produce its bank records to the Securities and Exchange Commission (SEC).

Just recently, the SEC had requested a court order to force the company to disclose its bank records, which would reveal how it spent the funds raised in the initial coin offering (ICO). The legal battle between the regulator and Telegram began last October when the SEC obtained an emergency restraining order against the company alleging it conducted an “unregistered, ongoing digital token offering” in the U.S. and overseas in which it raised over $1.7 billion.

Telegram has been denying any wrongdoing on its part and had described the SEC’s request for its bank records as an “unfounded fishing expedition.”

In a previous ruling, the District Court for the Southern District of New York had rejected the SEC’s request, although without prejudice.

The SEC again pushed its request for bank records as it produced evidence showing that Telegram continued to sell its gram tokens even after its ICO concluded, CoinDesk reported. According to the documents filed by the SEC on Friday, two entities – Da Vinci Capital and Gem Limited – invoiced Telegram requesting commissions for selling millions of dollars worth of gram tokens in June and July 2018, while the ICO had ended in March of that year.

"These documents undermine Telegram’s claimed affirmative defense that the Offering was exempt under Regulation D. First, Telegram either raised more than the $1.7 billion for which it claimed an exemption, or it did not raise $1.7 billion as of March 29, 2018 and the later funds may have been raised through underwriters," an earlier SEC filing said.

The court has now said that Telegram should provide its bank records by February 26 in a new ruling dated Jan. 13. The court said:

“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. 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.”

Cointelegraph reported that Telegram’s attorneys have agreed to provide its full bank records to the regulator.

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