A federal judge in Utah has sanctioned the U.S. Securities and Exchange Commission (SEC) after the agency cracked down on inaccurate statements it made in a cryptocurrency fraud case.
In an order filed Monday, U.S. District Judge Robert Shelby issued a temporary restraining order (TRO) against Utah-based company Digital Licensing, Inc. accused the SEC of “malicious conduct.” We are developing our business under the name “DEBT Box”.
Last July, the SEC issued a temporary asset freeze against DEBT Box, alleging that the company operated a fraudulent scheme in which it sold fake “node licenses” to investors that purported to generate crypto assets. , obtained injunctions and other emergency relief. Via mining.
The company is said to have raised approximately $50 million and an unspecified amount of Bitcoin (BTC) and Ethereum (ETH).
The SEC obtained a TRO and asset freeze, in part, alleging that DEBT Box and its founders were funneling investor funds into luxury purchases and accounts overseas.
However, the defendants filed a motion to vacate the court-granted temporary restraining order, alleging that the SEC misrepresented the facts in its complaint.
The restraining order was lifted at a hearing in October, and in November the judge in the case asked the SEC to explain the alleged misrepresentations.
In a response filed in December, the SEC acknowledged that one of its attorneys “made statements” that were inaccurate during the initial restraining order hearing in July.
SEC Chief Trial Attorney Michael Welsh argued during the hearing that the defendants closed approximately 33 bank accounts in the 48 hours leading up to trial.
The regulator admitted Wales' number was derived from a miscommunication. In fact, he had only 24 bank accounts closed during the month of the hearing, and he had no bank accounts closed, the SEC explains.
However, the SEC noted that although the balances of several bank accounts owned by certain defendants decreased significantly in July, they were not closed. Regulators also acknowledged multiple instances in which interpretations and inferences were incorrectly presented as fact.
In a recent order, Judge Shelby called the SEC's actions a “gross abuse of power” that “substantially undermines the integrity of these proceedings and the judicial process.”
“In such circumstances, the court will exercise its inherent power to sanction the commission's malicious conduct. Accordingly, the court will indemnify the trustee for all costs arising from the TRO and the appointment of the trustee. Imposing sanctions for attorney’s fees and expenses, including payment of all costs and fees.”
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