Telegram has been ordered by District Judge P. Kevin Castel of the New York Southern District Court to explain why it shouldn’t have to turn over financials related to its $1.7 billion ICO.
The Securities and Exchange Commission said that the investment data is important ahead of the next week’s deposement of 3 Telegram employees, including Pavel Durov.
The SEC letter states –
“Defendants’ refusal to fully disclose and answer questions about their disposition of the $1.7 billion they raised from investors is deeply troubling.”
The SEC is investigating how ICO investor money was used, as indicated by a case filing to the District Court on Thursday. Telegram has denied to handover the ICO allocation records which are relevant to the “efforts of others,” which is p[art of the Howey Test used by the Securities and Exchange Commission to determine in case a financial product is a security.
Jake Chervinsky, the Compound Finance general counsel, told in an interview –
“The SEC is asking the court for an order compelling production of this information immediately, in advance of an upcoming deposition.”
He added –
“[The] judge may already plan to grant the motion and just wants to give Telegram its chance to be heard before doing so. I wouldn’t be surprised if Telegram responds in a few hours and the Judge issues an order granting the motion a few hours after that (or tomorrow morning).”
Ahead of the deposition, the SEC has asked for the relevant financial records, however, Telegram has only released credits, and not debits, of its ICO related investments to date citing issues with its banking partners.
The SEC letter read –
“The requested bank records are highly relevant to the issues in dispute in this case, including how much money Telegram has spent, and in what manner, in developing the TON Blockchain.”
The SEC added –
“This evidence is relevant to the efforts Telegram has made to ensure the viability and profitability of the Grams it sold.”
The court ordered Telegram to halt the issuance of its gram token in October last year following an emergency action and restraining order by the SEC. The regulator stated that Telegram’s ICO constituted an unregistered securities offering.
The NY court ordered founder and CEO Durov to be deposed at a location that was mutually agreed upon. The deposition is scheduled for January 7-8 in Dubai, UAE.