Inner City Press





In Other Media-eg New Statesman, AJE, FP, Georgia, NYTAzerbaijan, CSM Click here to contact us     .



These reports are usually available through Google News and on Lexis-Nexis
,



Share |   

Follow on TWITTER

Home -

These reports are usually available through Google News and on Lexis-Nexis

CONTRIBUTE

(FP Twitterati 100, 2013)

ICP on YouTube

More: InnerCityPro

BloggingHeads.tv
Sept 24, 2013

UN: Sri Lanka

VoA: NYCLU

FOIA Finds  

Google, Asked at UN About Censorship, Moved to Censor the Questioner, Sources Say, Blaming UN - Update - Editorial

Support this work by buying this book

Click on cover for secure site orders

also includes "Toxic Credit in the Global Inner City"
 

 

 


Community
Reinvestment

Bank Beat

Freedom of Information
 

How to Contact Us



As SEC Moves to Strike Telegram Void for Vagueness Defense Telegram Moves for Summary Judgment

By Matthew Russell Lee, Exclusive Patreon
BBC - Decrypt - LightRead - Honduras - Source

SDNY COURTHOUSE, Jan 15 – In the SEC's case against Telegram and its proposed Gram crypocurrency, Federal Judge P. Kevin Castel held a teleconference on the afternoon of January 6.

    The SEC on January 2 asked Judge Castel to order Telegram to disclose bank records before or during its two day deposition of Telegram founder Pavel Durov January 7-8 in Dubai.

   On the January 6 teleconference, Telegram's counsel, Alex Drylewski of Skadden Arps, argued that producing the bank records will requiring reviewing the privacy rights of financial counterparties in 30 or more jurisdictions. More on Patreon here.

 Now on January 15, the SEC has moved to strike Telegram's first affirmative defense (of "void for vagueness"), saying that Telegram's response should be due on January 21, and Telegram has moved for summary judgment. As another industry participatnt has remarked to Inner City Press, When goliaths fight...

  Telegram's argument, 50 pages in all from Skadden Arps, is that GRAMS will not be securities, and that the private placement was / is fine. It proceeds: "GRAMS WILL NOT BE SECURITIES FOLLOWING LAUNCH OF THE TON BLOCKCHAIN ...............................22

A. Gram Purchasers Will Not Have an Expectation of Profits Based on the Managerial Efforts of Others ........................................25

1. Grams Were Designed and Promoted for Consumptive Use .....................25

2. Any Expectation of Profits Will Not Be Based on Telegram’s Efforts .............................................28

(a) Telegram Has Disclaimed Any Promise of Future Efforts ............28

(b) Any Profits Based on Speculative Trading Are Insufficient To Turn Grams Into Securities ......................................................30

 ii (c) Any Future Efforts By Telegram Would Not Be “Essential” ........32

B. There Will Be No “Common Enterprise” in Grams Following Launch ................34

1. No Horizontal Commonality.............................35

2. No Vertical Commonality ....................................37

C. Whether Grams Are Securities Depends on Their Circumstances After Launch of the TON Blockchain .......................39

D. The SEC’s Failure To Provide Clarity and Fair Notice Regarding Its Claims Weighs in Favor of Defendants ....................................41

II. DEFENDANTS’ PRIVATE PLACEMENT DOES NOT CONSTITUTE A “PAST VIOLATION” OF THE SECURITIES ACT ......................42

A. The Private Placement Was Conducted Pursuant to Valid Exemptions Under Rule 506 ...................42

 B. Defendants Are Entitled to a Valid Exemption Under Section 4(a)(2) of the Securities Act .........................45

III. THE SEC’S APPLICATION FOR AN INJUNCTION SHOULD BE DENIED .............47

  Late on January 10, the SEC renewed its request for the records and stating "Telegram does not even mention the names of the foreign countries whose laws might apply, nor does it cite any specific data privacy laws. At his deposition two days ago, Mr. Durov, the CEO of a company holding approximately $1.3 billion of investor assets, similarly claimed [TWO LINES REDACTED] See Ex. A (Excerpts of Dep. of Pavel Durov, dated Jan. 7-8, 2020) at 283:17—284:9. The Court therefore cannot assess the threshold question of which country’s data privacy laws may even apply to Telegram’s handling of the data based on Telegram’s vague submission." Why the redaction? Who's more secret?

  Now on January 13 Judge Castel has instructed Telegraph to produce the banking record by February 26: " 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. The Court does not anticipate extending this date nor the existing schedule for the motions for summary judgment or for a preliminary injunction. (Signed by Judge P. Kevin Castel on 1/13/2020) (jwh) " More on Patreon here.

    Judge Castel on January 6 declined to extend the deadlines in the case but directed Telegram to, by January 9, filed a proposed schedule to disclose or at least review for privacy the requested bank records.

  Now on the evening of January 9, Telegram's law firm Skadden Arps has written that the SEC's requests cover 770 individuals or entities and that since September they have only been able to review 76, finding 12 separately jurisdictions. They want five to seven weeks to do the work. But how would have impact motions and a trial? More on Patreon here.

     After briefing, there will be an in-person hearing on February 18, on both the motions for preliminary injunction and for summary judgment. The SEC's Jorge Tenreiro declined to consolidate that with the trial on the merits. Telegram wants a bench trial, and says the SEC wants a jury trial.

  Drylewki said that if the case or threat of injuction is not resolved by the end of April, under the terms of the private placement Telegraph would have to give back the money to investors. Inner City Press, which after requesting it was present in Judge Castel's chambers for the teleconference, will continue to cover this case.

Soon after the teleconference it reported thet above; hours later, from the court, this: "ORDER denying without prejudice [52] Letter Motion to Compel: The Court held a telephone conference with parties on January 6, 2020 to address the discovery dispute raised in plaintiff's letter of January 2, 2020. (Doc. 52). (!) The parties agree that an evidentiary hearing is not required to decide the motion for a preliminary injunction, which therefore will be decided on written submissions and oral argument alone. (2) The scheduled depositions may proceed with no restrictions placed on plaintiff's ability to question witnesses regarding the issues raised in plaintiffs January 2 letter. (Doc. 52). (3) The Court denies, without prejudice, plaintiff's application to compel the production of defendant's bank records. (Doc. 52). 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. (Signed by Judge P. Kevin Castel on 1/6/2020) (jwh)."

  It is SEC v. Telegram, 19-cv-0439 (Castel). More on Patreon here.

***

Your support means a lot. As little as $5 a month helps keep us going and grants you access to exclusive bonus material on our Patreon page. Click here to become a patron.

Feedback: Editorial [at] innercitypress.com
SDNY Press Room 480, front cubicle
500 Pearl Street, NY NY 10007 USA

Mail: Box 20047, Dag Hammarskjold Station NY NY 10017

Reporter's mobile (and weekends): 718-716-3540



Other, earlier Inner City Press are listed here, and some are available in the ProQuest service, and now on Lexis-Nexis.

 Copyright 2006-2020 Inner City Press, Inc. To request reprint or other permission, e-contact Editorial [at] innercitypress.com for