The SEC faced penalties following a judge’s concerns regarding ‘materially untrue and deceptive’ statements in its case against Debt Box.
The United States Securities and Exchange Commission (SEC) has filed to expel its case against Debt Box, a crypto company. This is after a federal judge threatened to penalise it for ‘deceptive and untrue’ claims.
In a January 30 court filing, the Securities and Exchange Commission petitioned Judge Robert Shelby of the Northern Division District Court of Utah to strike out its case against Digital Licensing Inc., Debt Box’s parent firm, without bias.
SEC’s Legal Team Downplay Basis for Sanctions
The regulator’s attorneys revealed that despite the Commission admitting the need for its lawyers to be more forthcoming with the court, sanctions are unnecessary or inappropriate to handle those problems. In case the court establishes that a sanction is necessary, it must refrain from imposing a sanction that surpasses dismissal without bias.
Dismissal without prejudice would aid the Securities and Exchange Commission to refile a case against the crypto company later. In its case, the regulator claimed that Debt Box sold unregistered securities to investors, defrauding them an estimated $50M.
SEC Secures Restraining Order Against Deceptive Company
The SEC also acquired a restraining order against the Utah-founded firm, claiming that the company ‘deceived investors concerning nearly all material facets of their unregistered securities offerings. This included false assertions that they participated in crypto asset mining.
The regulator’s attorneys acquired an ex parte application, indicating the company’s inability to challenge the restraining order.
Judge Robert Shelby of the United States District Court in Utah noted that the Securities and Exchange Commission had made ‘materially untrue and misguiding’ representations in the case. He cautioned that the court could punish the regulator.
In its January 31 filing, the regulator said it is ‘taking wider corrective intervention to ensure the issues raised by the court do not emerge again.’ This includes compulsory training concerning the ‘significance of openness.’
Regulator’s Crypto Enforcement Interventions
The Securities and Exchange Commission pursued more than 24 enforcement interventions against crypto companies last year, a considerable surge compared to earlier years. Gary Gensler, the chair, alleged ‘widespread misconduct’ in the sector.
The SEC has charged firms such as Kraken, Nexo, Gemini Genesis, and Celsius. Nexo and Kraken paid civil penalties of $22.5M and $30M respectively.
In June last year, the SEC sued Coinbase for its staking service. In this case, the crypto exchange was faulted for failing to register as a clearing house, exchange, and broker. Besides, it had sold unregistered exchanges through its staking services.
Earlier in January, United District Judge Katherine Poll Failla asked if the SEC was ‘sweeping too wide’ in its application of securities regulations. This happened as the regulators’ and Coinbase’s attorneys challenged each other in court.
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