From what I heard, the issue is that they received a court order to hand over some information and they didn't respond to it. They didn't challenge it, they just ignored it and that must have upset someone with power.

Still, arresting the CEO seems very strange. A fine on the business, some sanctions even, but arresting the CEO does small of intimidation.

They should have responded even if it was to say "see you in court". I think Telegram has a small team though and I don't know how many requests they get so it might just be a case of being overwhelmed.

The ironic thing is that if Telegram was end to end encrypted like other services then they could have just responded with "we have nothing to hand over" so the lesson seems to be that service providers should end-to-end encrypt everything, record nothing and make it as hard as possible to record anything. There's been quite a few comments that Signal and WhatsApp wouldn't have this legal issue since they do end-to-end encrypt.