[skneko]

This does not send personal files to MS, no. It sends executables that have been already flagged as a virus through other methods (e.g. heuristics). Also this is part of Defender, not of SmartScreen.

[blibble]

it states that it can send personal files to MS, but it's "likely" that you will get a prompt before

plus the T&Cs let them send whatever they want

Windows now behaves like mid 2000s malware, but with more ads