On February 4, the Federal Communications Commission (FCC) proposed a $4,492,500 fine against Telnyx LLC for allegedly allowing illegal robocalls on its network. The FCC’s Notice of Apparent Liability for Forfeiture (NAL) serves as a formal notification of the apparent violations and the proposed monetary penalty. It is not a final Commission action. Telnyx will have the opportunity to respond to the allegations, submit evidence, and present legal arguments before the FCC makes a final determination.
The NAL outlines that Telnyx failed to take necessary measures to prevent malicious actors from using its network to make illegal robocalls. These calls, placed from what is referred to in the NAL as the MarioCop Accounts because of the account holders’ email addresses, impersonated a fictitious FCC “Fraud Prevention Team” and targeted FCC staff and their family members, among others. The robocalls allegedly aimed to intimidate and defraud recipients, with one individual reporting a demand for $1,000 in Google gift cards to avoid supposed legal consequences.
Key Violations
The FCC’s investigation revealed several critical failures on the part of Telnyx:
- Failure to Verify Customer Identity: Telnyx did not adequately verify the identities of its customers, who used fake names and addresses. The company collected minimal information, such as names, email addresses, physical addresses, and IP addresses, but did not take further steps to corroborate this information.
- Interestingly, the NAL also noted the customer’s use of Bitcoin as a potential red flag. “Although not a basis for our finding of apparent violations in this case, we note that Telnyx accepted Bitcoin as payment for the MarioCop Accounts, which further helped the account holders to conceal their identities.”
- Inadequate Know Your Customer (KYC) Measures: Despite the requirement under Section 64.1200(n)(4) of the FCC’s rules to know their customers and exercise due diligence, Telnyx’s KYC measures were found lacking. The company did not verify the legitimacy of the information provided by the customers, nor did it investigate discrepancies in the data collected.
- Allowing High-Volume Call Origination: Telnyx permitted the creation of accounts that enabled the origination of a significant volume of calls without proper vetting. This oversight allowed the fraudulent robocalls to be made, causing substantial harm to the recipients.
In a press release announcing the NAL, newly-appointed FCC Chairman Brendan Carr emphasized the importance of this action, stating, “Cracking down on illegal robocalls will be a top priority at the FCC … This fine flows from an apparently illegal robocalling scheme and continues the FCC’s longstanding work to stop bad actors.”
Dissent and Separate Statements
Commissioner Nathan Simington issued a dissenting statement, conceding the egregiousness of the conduct but citing concerns related to the Supreme Court’s decision opinion in Jarkesy that held, pursuant to the Seventh Amendment, when the Securities and Exchange Commission brings an enforcement action seeking civil penalties, it must do so in federal court, where a jury trial is available, as opposed to initiating enforcement actions within its own in-house proceedings. According to Commissioner Simington, the holding prevents him from voting to approve the fine. Commissioner Anna M. Gomez issued a separate statement, highlighting the importance of service providers working closely with the FCC to identify and stop illegal traffic.
