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I found the source for it on GitHub https://github.com/DrKLO/Telegram and its FAQ and you're right about end-to-end, but they say that key is decentralised and kept in various jurisdictions, so it will take a joint operation to force them to give away the keys https://telegram.org/apps#source-code
You are correct about Telegram not using E2EE encryption by default, and they are also extremely misleading about this (technically the image is not lying because it doesn't specify E2EE, but not being E2EE'd is basically the same as not being encrypted). Signal is the best out of the three since their server is also open source (It's actually "source available" until they add a Free Software license, since by default code is protected by copyright law), however there is also no way to verify that the source they publish is running on their servers unmodified.
End to end encryption is done on the client. The client is FOSS, and unless you have a fisher-price iPhone, you should be able to compile the client from source just fine. E2EE is handled by this library. I'm not well versed with this library, but my understanding is that the biggest concern with Telegrams E2EE is that it is a home-grown algorithm, rather than using something that already exists and has been battle-tested by applications other than Telegram.
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