Author: Arain, ChainCatcher

Editor: Marco, ChainCatcher

The recent arrest of Pavel Durov, the founder of Telegram, in Paris on the evening of August 24 (local time in France) has attracted widespread attention in the market, sparking discussions from well-known figures in the investment, business, and political sectors, including endorsements from celebrities such as Elon Musk, the founder of Tesla, Shaun Maguire, a partner at Sequoia Capital, and Vitalik Buterin, the founder of Ethereum.

The key words of support have focused on "the European Union" and "freedom of speech." Elon Musk has made multiple statements on X regarding Pavel Durov's arrest, while Nigel Farage, the leader of the UK Reform Party and Member of Parliament, commented on X, "Pavel Durov's arrest is worrying. Telegram is a secure application for freedom of speech. Perhaps there are some bad actors on it, but every platform has them. What's next… Elon Musk's arrest?"

Elon Musk's support for Pavel Durov may be seen as a sign of mutual support. When Elon Musk initially acquired Twitter (the predecessor of X) for $44 billion, he touted himself as a "freedom of speech" advocate and has criticized the lack of freedom of speech in the US government and the European Union on multiple occasions.

In December 2023, the committee formally sued X, assessing whether X may have violated the Digital Services Act (DSA) in the areas of risk management, content moderation, dark mode, advertising transparency, and access to research data, and notified X on July 12 this year that it had violated the DSA regulations.

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

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

For leaders of social media platforms, such arrests set a dangerous precedent. The EU and US governments have previously summoned and questioned leaders of other social media companies, but few leaders of large tech companies have been arrested for events on these platforms.

X Receives Warning from the EU

Pavel Durov's arrest in France this time may also be subject to restrictions related to the DSA.

Alex Thorn, research director of the cryptocurrency management company Galaxy Digital, posted on X that Telegram may be accused of not complying with the EU's 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 in the United States, which exempts platforms from responsibility for user content."

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

The DSA aims to strengthen user online safety and requires relevant companies to take legal responsibility for harmful content, false information, advertising tracking behavior, and anti-competitive behavior.

Under this law, the EU can impose non-compliance penalties on companies or even require them to cease operations. Companies can correct violations within a certain period, but if the European Commission finds the feedback unsatisfactory, the company may face fines of up to 6% of its global annual turnover.

In addition, super-large online platforms and search engines must undergo an independent audit at least once a year, allowing the European Commission and audited researchers access to their data and submit additional transparency information.

According to official data from X, the platform has over 45 million monthly active users in the EU, making it a super-large online platform according to the DSA definition. On December 18 last year, the European Commission initiated a formal investigation into X, and in May of this year, X was asked to provide information on reducing content moderation resources in accordance with the DSA—X reduced its content moderation team by nearly 20% and reduced the coverage of EU languages from 11 to 7.

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

• Firstly, X's design and operation of the "verified account" interface with a "blue checkmark" do not conform to industry practices and deceive users. Since anyone can subscribe to obtain this "verified" status, it negatively affects users' freedom and ability to make wise decisions about the authenticity of their accounts and the content they interact with. There is evidence that malicious actors with motives abuse "verified accounts" to deceive users.
• Secondly, X does not meet the requirements for advertising transparency because it does not provide a searchable and reliable ad repository, and instead sets up design features and access barriers that make the repository unsuitable for its transparency purposes. In particular, this design does not allow necessary supervision and research on emerging risks associated with online ad distribution.
• Thirdly, X failed to provide researchers with access to its public data as required by the DSA. Specifically, X prohibits eligible researchers from independently accessing its public data, as described in its terms of service. In addition, 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 leaves them no choice but to pay unreasonable high fees.

This means that X may be required to pay fines of up to 6% of its global annual turnover and be ordered to take measures to address the violations.

However, regarding Pavel Durov's recent arrest, an EU Commission spokesperson clarified that "criminal prosecution is not one of the potential sanctions for violating the DSA. The DSA does not define what is illegal, nor does it establish any criminal offenses, so it cannot be invoked."

It is reported that Pavel Durov was arrested by agents of the French National Anti-Fraud Office (ONAF), and the search warrant was issued by the OFMIN of the French National Judicial Police, mainly because the social network Telegram founded by Pavel Durov is filled with drug trafficking, illegal firearms, and child pornography content, and Telegram has not cooperated with the authorities on this matter.

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

In addition to X, the EU 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 a dismissive and disdainful attitude towards the warnings issued by the EU based on the DSA.

On August 12, Elon Musk interviewed the former US president and current Republican presidential candidate Donald Trump on X, and on the same day, Thierry Breton, the EU Internal Market Commissioner, issued a warning to Elon Musk about X spreading "hate, disorder, incitement to violence, or certain false information"—this involves the "due diligence obligation" stipulated in the DSA, aimed at regulating online hate speech and false information.

The preliminary investigation results and notifications from the DSA regarding X are still pending, and Elon Musk responded to Breton with an emoji from the 2008 movie "Tropic Thunder," in which an actor shouts, "Back the f*** up, own your face."

In the recent Pavel Durov arrest incident, Elon Musk also made a statement, expressing dissatisfaction with the lack of freedom of speech in Europe.

"It's 2030 Europe now, and you get executed for liking a meme."

He called out three times in French: "Freedom. Freedom! Freedom?"

"Sharing X posts with people you know is crucial to supporting freedom of speech, especially in countries with strict censorship."

Elon Musk posted multiple tweets mocking Europe for lacking freedom of speech, demanding the release of Durov, and wrote in French, "Freedom. Freedom! Freedom?"

The Cost of Freedom of Speech

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

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

In 2022, Elon Musk paid $44 billion to acquire "Twitter," the predecessor of X, and immediately lifted the ban on a batch of accounts that had been banned by Twitter.

In the year he acquired Twitter, Elon Musk once banned the Twitter accounts of several journalists, claiming that the journalists provided "assassination coordinates" by posting real-time locations. After Elon Musk conducted a poll on Twitter, he unblocked the journalists' accounts within about a week.

Last year, during an interview with CNBC, Elon Musk told advertisers who chose to remove their ads from X to "go to hell." At the Cannes Lions International Festival of Creativity in France this year, he explained his previous remarks, saying, "This is not directed at the entire advertising industry. This is about respecting freedom of speech. I think it's important to have a global platform for freedom of speech, allowing people with different views to express themselves. In some cases, some advertisers insist on censorship… If we have to choose between censorship and loss, censorship and money, or freedom of speech and loss, we will choose the latter."

According to the current terms of X, as long as appropriate labels are attached, the platform allows the posting of violent and pedophilic content, but account owners must not be associated with or promote violent or hate entities.

At the end of last year, over 100 advertisers withdrew their ads from X, including companies such as Apple, Sony, General Motors, and Disney. Some advertisers explained that it was related to the speech environment on X.

If X refuses to cooperate with the DSA, the best outcome would be for X to leave the EU, which would mean a loss of 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 X does not cooperate and does not leave, it may face fines of up to 6% of its global annual turnover.

Interestingly, in the matter of freedom of speech, Elon Musk may stand together with Donald Trump.

On the day Elon Musk interviewed Donald Trump, Trump's campaign team stated that the EU should mind its own business instead of trying to interfere in the US presidential election. They said, "The EU is an enemy of freedom of speech and has no authority to guide the US in conducting election campaigns."

According to The Wall Street Journal on July 15, Elon Musk plans to donate about $45 million per month to a political action committee (PAC) supporting Donald Trump's presidential campaign. Other prominent figures in the tech industry are also donating to this group. However, Fortune magazine clarified on July 22 that Elon Musk will not donate $45 million per month, but he did establish 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 unrelated to the campaign team. It cannot directly fund candidates but can conduct support activities such as advertising or grassroots activities.

In addition, during an interview with Reuters this month, Donald Trump expressed willingness to consider offering Elon Musk a position in the US cabinet or as an advisor if elected. Elon Musk immediately responded, saying he would be willing to serve in the cabinet. However, in a recent interview, Donald Trump changed his statement, saying that Elon Musk is busy managing multiple companies but can participate in discussions and provide advice.

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