Support for Telegram's founder: Musk's long-term concerns and immediate worries

Author: Arain, ChainCatcher

Editor: Marco, ChainCatcher

The arrest of Telegram founder Pavel Duro on the evening of August 24 (local time in France) has recently attracted widespread attention from the market, sparking discussions among notable figures from the investment, business, and political sectors, including support from celebrities such as Tesla founder Elon Musk, Sequoia Capital partner Shaun Maguire, and Ethereum founder Vitalik Buterin.

The key themes of support have focused on "the European Union" and "freedom of speech." Elon Musk has repeatedly expressed his views on Pavel Duro's arrest on X, while Nigel Farage, leader of the Reform Party in the UK and MP for Clacton, commented on X, stating: "Pavel Durov's arrest is concerning. Telegram is a secure free speech application. There may be some bad actors on it, but any platform has those. What’s next… Elon Musk getting arrested?"

Elon Musk's support for Pavel Duro may reflect a sense of shared vulnerability. When Musk initially acquired Twitter (the predecessor of X) for $44 billion, he positioned himself as a champion of "free speech" and has criticized the U.S. government and the EU for "lack of free speech" on multiple occasions.

In December 2023, the committee initiated formal litigation against X, assessing whether X might have violated the Digital Services Act (DSA) in areas related to risk management, content moderation, dark patterns, advertising transparency, and researcher data access, and informed X of its violations of the DSA on July 12 of this year.

With the arrest of the Telegram founder, a new debate has begun regarding freedom of speech on the internet.

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

For social media leaders, arrests like this set a dangerous precedent. The EU and U.S. government have summoned and questioned leaders of other social media companies, but few leaders of large tech companies have been arrested for events occurring on their platforms.

X Receives Warning from the EU

Pavel Duro's arrest in France may also be constrained by DSA-related regulations.

Alex Thorn, head of research at cryptocurrency asset management firm Galaxy Digital, stated on X that Telegram could be accused of not complying with the EU's DSA, saying, "This is a very bad law that holds platforms accountable for illegal user content. This responsibility sharply contrasts with Section 230 in the U.S., which exempts platforms from liability for user content."

Telegram issued a statement asserting that the company complies with EU laws, including the DSA, and that their moderation practices meet industry standards.

The DSA aims to enhance user safety online and compel relevant companies to take legal responsibility for harmful content, misinformation, advertising tracking practices, and anti-competitive behavior.

Under this legislation, the EU can impose non-compliance penalties on companies or even require them to cease operations. Companies can correct relevant violations within a certain period, but if the European Commission finds that the feedback is not satisfactory, companies may face fines of up to 6% of their global annual revenue.

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

According to official data from X, the platform has over 45 million monthly active users in the EU, qualifying it as a very large online platform under the DSA definition. On December 18 of last year, the European Commission initiated formal procedures to investigate X, and in May of this year, it requested X to provide information regarding the reduction of content moderation resources under the DSA—X had reduced its content moderation team by nearly 20% and decreased its language coverage within the EU from 11 EU languages to 7.

In July of this year, the EU sent preliminary investigation results to X, determining that X had violated three provisions of the DSA:

• First, X's design and operation of the "verified accounts" interface with a "blue check" does not conform to industry practices and deceives users. Since anyone can subscribe to obtain this "verified" status, it negatively impacts users' ability to freely and wisely determine the authenticity of accounts and the content they interact with. There is evidence that motivated malicious actors have abused "verified accounts" to deceive users.
• Second, X does not meet the advertising transparency requirements because it has not provided a searchable and reliable advertising repository, instead setting design features and access barriers that render the repository unsuitable for its transparency purposes to users. Specifically, this design does not allow for necessary oversight and research into the emerging risks posed by online advertising distribution.
• Third, X failed to provide access to its public data to researchers as stipulated in the DSA. Specifically, X prohibits eligible researchers from independently accessing its public data, such as through scraping, as described in its terms of service. Furthermore, the process by which X grants eligible researchers access to its application programming interface (API) seems to hinder researchers from conducting their research projects or forces them to pay unreasonably high fees.

This means that X may be subject to fines of up to 6% of the provider's global annual revenue while being ordered to take measures to address the violations.

However, regarding the recent arrest of Pavel Duro, a European Commission spokesperson clarified that "criminal prosecution is not one of the potential sanctions for violating the DSA. The DSA does not define what constitutes illegal behavior, 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), with the search warrant issued by the OFMIN of the French National Judicial Police, primarily due to the presence of drug trafficking, arms black market, and child pornography content on the social network Telegram founded by Pavel Durov, and Telegram's non-cooperation with authorities regarding this matter.

Although it has been clarified that Pavel Durov's arrest in France is unrelated to the DSA, the European Commission spokesperson stated that they are closely monitoring developments related to Telegram and are ready to cooperate with French authorities at any time.

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

Musk's Response

Elon Musk has adopted a dismissive and contemptuous attitude towards the EU's warning based on the DSA.

On August 12, Elon Musk interviewed former U.S. President and current Republican presidential candidate Donald Trump on X, and on the same day, EU Internal Market Commissioner Thierry Breton issued a warning to Musk regarding the dissemination of "content that promotes hate, chaos, incites violence, or certain misinformation"—this relates to the "due diligence obligations" stipulated in the DSA, aimed at regulating online hate speech and misinformation.

With the preliminary investigation results and notifications regarding the DSA still looming, Elon Musk responded to Breton with a meme from the 2008 film "Tropic Thunder," in which a character exclaims, "Take a big step back and literally f*** your own face."

In the latest incident regarding Pavel Durov's arrest, Elon Musk also expressed his dissatisfaction with the lack of free speech in Europe.

"Welcome to Europe in 2030, where you get executed for liking a meme."

He called out three times in French: "Liberty! Liberty! Liberty?"

"Sharing X posts with people you know is crucial for supporting free speech, especially in countries with strict censorship."

Elon Musk has posted multiple times mocking Europe for its lack of free speech, calling for Durov's release, and wrote in French: "Liberty! Liberty! Liberty?"

The Cost of Free Speech

It seems that Elon Musk is a proponent of "free speech."

If we consider whether the purpose of free speech stems from self-interest, we can examine what Elon Musk has gained by insisting on "free speech."

In 2022, Elon Musk paid $44 billion to acquire X's predecessor, "Twitter," and immediately lifted bans on a number of accounts that had previously been suspended.

In the year he bought Twitter, Elon Musk had temporarily banned several journalists' accounts, claiming that they had provided "assassination coordinates" by posting real-time locations. After conducting a poll on Twitter, Musk lifted the bans on the journalists' accounts within about a week.

Last year, in an interview with CNBC, Elon Musk told advertisers who chose to withdraw their ads from X to "get lost." At this year's Cannes Lions International Festival of Creativity, he explained his earlier comments: "This is not against all advertisers. It is a respect for free speech. I think it is important to have a global platform for free speech where people with differing views can express their opinions. 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."

According to X's current terms, as long as appropriate labels are applied, violent content and child exploitation content are allowed to be posted on the platform; however, account owners must not associate with or promote the activities of violent or hate entities.

At the end of last year, media reports indicated that over 100 advertisers had withdrawn from X, including companies like Apple, Sony, General Motors, and Disney, with some advertisers explaining this decision as related to the speech environment on X.

If X refuses to cooperate with the DSA, the best outcome would be for X to withdraw from the EU, which would mean losing 67 million EU users.

According to data released by Elon Musk last year, X's advertising revenue has declined by 50%, and cash flow remains negative. If EU users are lost, X's revenue may be affected. However, if it neither cooperates nor withdraws, it may face fines of up to 6% of its global annual revenue.

Interestingly, on the issue of free speech, Elon Musk may find himself aligned with Donald Trump.

On the day Elon Musk interviewed Donald Trump, Trump's campaign team stated that the EU should manage its own affairs instead of trying to interfere in U.S. presidential elections, saying, "The EU is an enemy of free speech and has no power to dictate how America conducts its campaigns."

According to a July 15 report by The Wall Street Journal, Elon Musk plans to donate approximately $45 million monthly to a political action committee (PAC) supporting Donald Trump's presidential campaign, with other notable figures in the tech industry also contributing to the committee. However, Fortune magazine clarified on July 22 that Elon Musk would not be donating $45 million monthly but had indeed established a PAC to sponsor Donald Trump's campaign.

According to documents released by the Federal Election Commission (FEC), the PAC was established at the end of May and is a legal entity independent of the campaign team, which cannot directly fund candidates but can engage in supportive activities such as advertising or grassroots efforts.

Additionally, during an interview with Reuters this month, Donald Trump expressed willingness to consider offering Elon Musk a position in the U.S. Cabinet or as an advisor if elected, to which Musk immediately responded that he would be "willing to serve in the Cabinet"—however, in a recent interview, Trump changed his stance, stating that Musk runs multiple companies and is busy, but could participate in discussions and provide advice.