A Utah judge denied the SEC’s request to dismiss the DEBT Box case and imposed sanctions.
A federal judge ruled Monday that the Securities and Exchange Commission acted in bad faith stemming from a lawsuit it filed against cryptocurrency startup DEBT Box and should impose sanctions including attorneys’ fees and costs.
Judge Robert Shelby of U.S. District Court in Utah said the SEC must pay legal fees as a result of a temporary restraining order imposed last year on Digital Licensing Inc., which does business as DEBT Box. The judge also denied the SEC’s decision to dismiss the case without prejudice, according to the court order. The case included a judge criticizing the SEC’s misleading statements and acknowledging that the agency had fallen short of expectations.
Throughout the 80-page order, Judge Shelby criticized the SEC’s actions in obtaining temporary restraining orders (TROs), including freezing assets and court-appointed receivers to assume control of the companies.
“We explicitly traded on our special status as a federal agency, reminding the court that we have received this relief several times over the past decade to show that we can be trusted when we ask to exercise this enormous judicial power,” said Shelby. .
The court approved the TRO, which froze assets and “turned lives upside down,” said Shelby.
“Ultimately, once the defendants were notified and had an opportunity to respond, each of the pillars of the purported factual foundation upon which the Commission built to create the required indication of irreparable harm fell apart upon examination,” said Shelby. “It was not a single inaccurate statement or negligent misrepresentation. Each of the assistance the Commission provided in seeking the TRO and later repeated in defense of the TRO turned out to be a combination of falsehood, mischaracterization and misunderstanding. ”
An SEC spokesperson said in a statement emailed to The Block that the agency is reviewing the decision.
Motion to Dismiss
The SEC filed: fire The suit was filed without prejudice in January, meaning regulators can refile the case. Judge Shelby denied that on Monday.
SEC recognize In late December, it said it had made inaccurate statements and “fell short” of expectations to be accurate and candid in court. Judge Shelby criticized the agency’s lawyers and ordered the SEC to account for “false or misleading” statements after the company claimed it was trying to move assets overseas to escape the regulator’s jurisdiction.
The SEC’s lawsuit against DEBT Box alleged that it defrauded thousands of investors out of at least $49 million by offering customers so-called “node licenses” that allowed them to mine 11 tokens for profit.
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