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Telegram loses bid to stop Russia from getting encryption keys

(Bloomberg) -- Telegram, the encrypted messaging app that’s prized by those seeking privacy, lost a bid before Russia’s Supreme Court to block security services from getting access to users’ data, giving President Vladimir Putin a victory in his effort to keep tabs on electronic communications.

Supreme Court Judge Alla Nazarova on Tuesday rejected Telegram’s appeal against the Federal Security Service, the successor to the KGB spy agency which last year asked the company to share its encryption keys. Telegram declined to comply and was hit with a fine of $14,000.

Telegram, which is in the middle of an initial coin offering of as much as $2.55 billion, plans to appeal the ruling. The process may last into the summer, according to the company’s lawyer, Ramil Akhmetgaliev. In case of non-compliance, the law implies a fine and potential blocking of Telegram’s service in the country, one of the firm’s biggest markets. But any decision to block the service would require a separate action by communications regulator Roskomnadzor and a court ruling, the lawyer said.

Putin signed laws in 2016 on fighting terrorism, which included a requirement for messaging services to provide the authorities with means to decrypt user correspondence. Telegram challenged an auxiliary order by the Federal Security Service, claiming that the procedure doesn’t involve a court order and breaches constitutional rights for privacy, according to documents.

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A man is seen as a silhouette as he checks a mobile device whilst standing against an illuminated wall bearing Telegram's logo in this arranged photograph in London. Photographer: Chris Ratcliffe/Bloomberg

The security agency, known as the FSB, argued in court that obtaining the encryption keys doesn’t violate users’ privacy because the keys by themselves aren’t considered information of restricted access. Collecting data on particular suspects using the encryption would still require a court order, the agency said.

“The FSB’s argument that encryption keys can’t be considered private information defended by the Constitution is cunning,” Akhmetgaliev, Telegram’s lawyer, told reporters after the hearing. “It’s like saying, ‘I’ve got a password from your email, but I don’t control your email, I just have the possibility to control.’”

The court decision is intended to make one of the last holdouts among communications companies bow to Putin’s efforts to track electronic messaging. Pavel Durov, the founder of Telegram, in June registered the service with the state communications watchdog after it was threatened with a ban over allegations that terrorists used it to plot a suicide-bomb attack.

Telegram has more than 9.5 million users in Russia, according to researcher Mediascope. It raised $850 million from investors in February in a so-called initial coin offering and is trying to raise another $1.7 billion, according to company documents seen by Bloomberg News. Telegram plans to use the proceeds to build a blockchain network with built-in cryptocurrency Gram that could enable faster transactions than Bitcoin.