In an unprecedented move, a US federal judge yesterday (Monday) issued a sanctions order against the Securities and Exchange Commission (SEC) for its inappropriate actions against DEBT Box, a Utah-based crypto company, calling the regulator’s actions a “gross abuse of power.”
Sanctions against the SEC
According to the court order, the regulator will have to pay the legal costs of DEBT Box.
“The bad faith is inextricable from the abusive conduct, and a sanction of attorneys’ fees and costs for all expenses resulting from that conduct is appropriate,” the Judge wrote in the order.
The judge in the Debt Box case has issued an 80 page opinion sanctioning the SEC for egregious misconduct in the case.The opinion is devastating to the SEC as an institution and to the particular lawyers who committed the misconduct.The judge made it crystal clear that the…
— MetaLawMan (@MetaLawMan) March 18, 2024
Misrepresentation of Evidence
The SEC sued DEBT Box last year, alleging fraud, and obtained a temporary asset freeze and restraining order against the company. Then, the regulator alleged that the crypto company was selling cryptocurrency mining licenses but, in reality, was creating tokens with an algorithm.
To obtain the temporary restraining order, the regulator alleged that the crypto company had already sent $720,000 overseas and would flee to the United Arab Emirates. It also raised concerns about the secret transfer of funds overseas if it was notified of the order. Although the court initially approved the order sought by the SEC, the Judge later concluded that the regulator misrepresented the evidence. Further, the $720,000 transfer was made within the United States, not overseas.
“Each piece of support the Commission offered in seeking the TRO – and then later reiterated in defending the TRO – proved to be some combination of false, mischaracterized, and misleading,” the Judge added in the latest ruling.
“Further, the Commission not only repeated and affirmed its misrepresentations in the face of contrary evidence, it presented new falsehoods to the court in an effort to subtly shift from its previous misrepresentations without acknowledging its previous errors.”
The SEC seems to have removed its web page related to the DEBT Box lawsuit, where a federal judge just imposed sanctions against the agency for a "gross abuse of power."Web Archive shows the page was still live in early Jan pic.twitter.com/vdB4KFiRbN
— Leo Schwartz (@leomschwartz) March 18, 2024
Earlier this month, My Forex Funds also sought a sanctions order from the court against the Commodity Futures Trading Commission. The prop trading company alleged that the regulator knowingly misrepresented facts and its “staff acted in bad faith” to obtain a temporary restraining order against the company and its CEO.
This article was written by Arnab Shome at www.financemagnates.com.
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