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District Court says ‘Request Denied’ to the SEC

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Coming up Empty?

As the upcoming deposition involving Telegram CEO, Pavel Durov, looms, the SEC felt it prudent to request the disclosure of full banking records.

This request, which was taken into consideration by presiding Judge, P. Kevin Caste, has now been reviewed and denied – to an extent.

A Middle Ground

While the request for full disclosure was denied, Telegram was not completely let off the hook.  In the Court's statement it is indicated that the company will, indeed, need to prove compliance with foreign data privacy laws.

The following is an excerpt from the ‘Order of Motion to Compel’.

“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.”

The Request

As the situation has continued to develop between the SEC and Telegram, the former felt as though these records were pivotal in making their case;  A case which purports that Telegram performed the unregistered sale and distribution of securities.

In their initial plea to the Court, in an effort to release Telegrams banking documents, the regulatory body stated,

Without fully un-redacted bank records…the SEC (and the Court) cannot fully understand (1) who made payments under which purchase agreement, (2) whether some of those payments were from entities who were acting as statutory underwriters, and (3) whether Telegram made any payments to such underwriters.”

Unfortunately for the SEC, they will now need to make their case against Telegram without this information.


As many are, Philip Moustakis of Seward & Kissel LLP, former Senior Counsel at the SEC, is closely following this situation.  He recently took the time to comment, and share his thoughts on these developments.

Philip Moustakis stated,

“The SEC's letter motion and Telegram's response, taken together, indicate there is a disagreement concerning the facts and circumstances of Telegram's offering to which the bank records the SEC seeks likely would be highly relevant. And though the court's order denies the SEC's request for bank records, it does so without prejudice, not on relevance grounds, but rather for Telegram to propose a schedule for their review to ensure their production complies with foreign data privacy laws, a concern raised by Telegram.”

He continued,

“One of the factual disputes in the case centers on whether Telegram complied with the requirements of Regulation D in its offer and sale of “Purchase Agreements for Grams.” The SEC alleges Telegram offered and sold Purchase Agreements in a manner that did not comply with Regulation D and failed to exercise reasonable care to assure that purchasers of the Purchase Agreements were not acting as statutory underwriters. The SEC alleges Telegram not only failed to take reasonable care, it actually paid others on a commissions-basis to resell the Purchase Agreements. Telegram argues that, at most, Defendants paid certain non-U.S. persons a finder's fee for helping to introduce Telegram to other non-U.S. investors. Another factual dispute, of course, is whether the Grams themselves are securities. I would be surprised if the court did not require Telegram to turn over the bank records the SEC seeks once the data privacy issues are addressed.”

*To learn more about Philip Moustakis and his past experiences, make sure to peruse our recent exclusive interview with him HERE.*


The long awaited deposition of Pavel Durov is expected to commence later this week.  During this event, it is expected that the CEO of Telegram will shed light on, not only their actions leading up to the SEC's intervention, but their intent.

The purpose of this event is to shed light, and gain insight, into the chain of events pre-trial.  This testimony, given under oath, can then be used for all parties to build their respective cases.

In addition, Pavel Durov will be joined in the deposition of Telegram by the company’s VP, Ilya Perekopsky, and employee Shyam Parekh.

Naturally, all eyes will continue to be on this situation as it continues to develop, as the results stand to hold industry wide ramifications.


Founded in 2013, Telegram operates out of Dubai.  The company has developed a popular messaging app that looks to rival other popular platforms, such as Discord and WhatsApp.

CEO, Pavel Durov, currently oversees company operations.


The Securities and Exchange Commission is a United States regulatory body.  The outfit is tasked with creating and enforcing fair and transparent markets surrounding securities.  This is achieved through monitoring, and the enforcement of, compliance measures upon all industry participants.

Chairman, Jay Clayton, currently oversees operations at the SEC.

In Other News

When news first broke of the request for banking records, days ago, the team at Telegram publicly commented, referring to the development as a ‘fishing expedition’ on the part of the SEC.  With the Court's decision now siding in favour of Telegram, it would appear as though the SEC will be going home hungry, for now, with no fish to be had.

Telegram Likens SEC Request to a ‘Fishing Expedition’