Supporting Telegrams founder, Musks long-term and short-term concerns

Original author: Arain , ChainCatcher

Original translation: Marco, ChainCatcher

The arrest of Telegram founder Pavel Duro in Paris on the evening of August 24 (local time in France) has attracted widespread attention from the market in recent days, triggering discussions among many well-known figures from the investment, business and political circles, including Tesla founder Elon Musk, Sequoia Capital partner Shaun Maguire, Ethereum founder Vitalik Buterin and other celebrities who have expressed their support.

The keywords of the support are mostly focused on EU and freedom of speech. Elon Musk has made several statements on X regarding the arrest of Pavel Durov. Nigel Farage, leader of the British Reform Party and MP for Clacton, commented on X: The arrest of Pavel Durov is worrying. Telegram is a safe application for free speech. Maybe there are some bad guys on it, but there are bad guys on any platform. What will happen next...Elon Musks arrest?

Elon Musks support for Pavel Duro may be a sign of the fact that the lips and teeth are in danger. When Elon Musk first acquired Twitter (the predecessor of X) for $44 billion, he claimed to be a free speech advocate and criticized the US government and the European Union for unfree speech on many occasions.

In December 2023, the Commission initiated formal proceedings against X to assess whether X may have violated the Digital Services Act (DSA) in areas related to risk management, content moderation, dark mode, advertising transparency, and researcher data access, and notified X of its violation of the DSA provisions on July 12 this year.

With the arrest of Telegrams founder, a new debate has begun surrounding freedom of speech on the Internet.

As the owner of X, Musk, who is unwilling to cooperate with EU regulation, obviously has greater concerns.

Arrests like this one set a dangerous precedent for social media leaders. The European Union and U.S. governments have subpoenaed and questioned leaders of other social media companies, but few leaders of big tech companies have been arrested over what happens on those sites.

X received a warning from the EU

Pavel Duro’s arrest in France may also be subject to restrictions under DSA regulations.

Alex Thorn, head of research at crypto asset management company Galaxy Digital, wrote on the X platform that Telegram may be accused of not complying with the EUs DSA. This is a very bad law that requires platforms to be responsible for illegal user content. This responsibility is in stark contrast to Section 230 of the United States, which exempts platforms from responsibility for user content.

Telegram issued a statement saying that the company complies with EU law, including the DSA, and that their audits are in line with industry standards.

DSA aims to strengthen user safety online and hold companies accountable for harmful content, false information, ad tracking, and anti-competitive behavior.

Under the law, the EU can impose penalties on companies for non-compliance or even require them to stop operating. Companies can correct related violations within a certain period of time, but if the European Commission finds that the feedback does not meet expectations, the company will face a fine of up to 6% of its global annual turnover.

In addition, very large online platforms and search engines must undergo independent audits at least once a year, allow the European Commission and vetted researchers access to their data, and submit additional transparency information.

According to Xs official data, the platform has more than 45 million monthly active users in the EU, and according to the DSA definition, it is a very large online platform. On December 18 last year, the European Commission launched a formal procedure to launch an investigation into X, and in May this year asked X to provide information on the reduction of content review resources under the DSA - X reduced its content reviewer team by nearly 20% and reduced the language coverage in the EU from 11 EU languages to 7.

In July this year, the EU sent a preliminary investigation result to X, finding that X violated three provisions of the DSA:

• First, the way X designed and operated the verified account interface with the blue checkmark was inconsistent with industry practice and deceptive to users. Since anyone can subscribe to obtain this verified status , it negatively impacts users ability to freely and intelligently decide the authenticity of accounts and the content they interact with. There is evidence that motivated malicious actors abuse verified accounts to deceive users.

• Second, X does not meet the requirements for ad transparency because, rather than providing a searchable and reliable ad repository, it places design features and access barriers that make the repository unsuitable for its purpose of transparency to users. In particular, the design does not allow for the necessary oversight and research into emerging risks posed by online ad distribution.

• Third, X failed to provide researchers with access to its public data under the conditions set out in the DSA. Specifically, X prohibited eligible researchers from independently accessing its public data, such as through scraping, as described in its Terms of Service. In addition, Xs process for granting eligible researchers access to its application programming interface (API) appears to prevent researchers from conducting their research projects or leave them with no choice but to pay unreasonably high fees.

This means that X could be required to impose a fine of up to 6% of the providers annual global turnover, as well as ordering the provider to take steps to address the breach.

However, regarding the recent arrest of Pavel Duro, a spokesperson for the European Commission clarified that criminal prosecution is not one of the potential sanctions for violations of the DSA. The DSA does not define what is illegal, nor does it establish any criminal offenses, so arrests cannot be invoked. Only national or international laws that define criminal offenses can be invoked.

It is reported that Pavel Durov was arrested by agents of the French National Anti-Fraud Office (ONAF). The search warrant was issued by OFMIN of the French National Judicial Police Directorate-General. The main reason was that the social network Telegram founded by Pavel Durov was full of drug trafficking, gun black market and child pornography, and Telegram did not cooperate with the authorities in this regard.

Although it was clarified that the DSA had nothing to do with Pavel Durovs arrest in France, a spokesperson for the European Commission said it was closely following developments related to Telegram and was ready to cooperate with the French authorities.

In addition to X, the European Commission also initiated formal proceedings against TikTok in February and April of this year, and formal proceedings against Meta in April and May of this year.

Musks response

Elon Musk has shown disregard and contempt for the EUs warnings based on the DSA.

On August 12, Elon Musk interviewed former US President and current Republican presidential candidate Donald Trump on X. On the same day, EU Internal Market Commissioner Thierry Breton issued an X warning to Elon Musk about spreading content that promotes hatred, chaos, incites violence, or certain false information - this involves the due diligence obligation stipulated in the DSA, which aims to regulate online hate speech and false information.

With the DSA’s preliminary findings and notice against X still hanging over his head, Elon Musk responded to Brayton with a meme from the 2008 movie Tropic Thunder, in which an actor yells, “Take a big step back and fuck your own face.”

Regarding the latest arrest of Pavel Durov, Elon Musk also expressed his views, showing his dissatisfaction with the lack of freedom of speech in Europe.

“It’s 2030 in Europe and you’re being executed for liking a meme.”

Calling three times in French: Liberty liberty! Liberty?

“Forwarding post X to people you know is essential to supporting free speech, especially in countries with heavy censorship”

Elon Musk posted several posts in a row, mocking the lack of freedom of speech in Europe and demanding the release of Durov. He wrote in French: Freedom. Freedom! Freedom?

The price of free speech

It seems that Elon Musk is a “free speech” party.

If you consider whether the purpose of free speech is self-interested, you can look at what Elon Musk has gained by insisting on free speech.

In 2022, Elon Musk paid $44 billion to purchase Twitter, the predecessor of X, and immediately unblocked a number of accounts that had been banned by Twitter.

In the year he bought Twitter, Elon Musk banned several journalists’ Twitter accounts, claiming that the journalists’ posting of their real-time locations was equivalent to providing “assassination coordinates.” However, after Elon Musk conducted a poll on Twitter, he unblocked the journalists’ accounts within a week.

Last year, Elon Musk told CNBC that advertisers who chose to remove their ads from X fuck you. At the Cannes International Advertising Festival in Cannes, France this year, he explained his remarks at the time: This is not directed at advertisers as a whole. This is about respecting free speech, and I think its important to have a global platform for free speech so that people with different views can express their views. In some cases, some advertisers insist on censorship... If we have to choose between censorship and loss, censorship and money, or free speech and loss, we will choose the latter.

Under Xs current terms, violent and pedophilic content is allowed on the platform as long as it is properly labeled, but account owners are not allowed to be affiliated with or promote the activities of violent or hateful entities.

At the end of last year, the media reported that more than 100 advertisers withdrew from X, including Apple, Sony, General Motors and Disney. Some advertisers explained that this was related to the speech environment on X.

If X refuses to cooperate with DSA, the best outcome is that X withdraws from the EU, which means losing 67 million EU users.

According to data released by Elon Musk last year, Xs advertising revenue has fallen by 50% and its cash flow is still negative. If it loses EU users, Xs revenue may be affected. However, if it does not cooperate or withdraw, it may face a fine of up to 6% of its global annual turnover.

Interestingly, Elon Musk might align with Donald Trump on the issue of free speech.

On the day that Elon Musk launched an interview with Donald Trump, Donald Trumps campaign team said that the European Union should mind its own business instead of trying to interfere in the US presidential election. The EU is an enemy of free speech and has no right to tell the United States how to conduct its campaign.

According to a report by The Wall Street Journal on July 15, Elon Musk plans to donate about $45 million per month to a group called the Political Action Committee (PAC) that supports Donald Trumps presidential campaign, and other well-known figures in the technology industry are also donating to the group. However, Fortune magazine clarified on July 22 that Elon Musk will not contribute $45 million per month, but did set up a PAC to sponsor Donald Trumps campaign.

According to documents released by the Federal Election Commission (FEC), the PAC was established in late May and is a legal entity unrelated to the campaign team. It cannot directly fund candidates but can carry out support activities such as advertising or grassroots activities.

In addition, Donald Trump said in an interview with Reuters this month that if elected, he would consider offering Elon Musk a U.S. cabinet or advisory position. Elon Musk immediately responded that he was willing to serve in the cabinet - but in a recent interview, Donald Trump changed his words and said that Elon Musk runs multiple companies and is busy, but he can participate in discussions and provide advice.

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