The U.S. Securities and Exchange Commission (SEC) says that it “deeply regrets” the errors made in the case against crypto firm Debt Box after the court found that the agency made “materially false and misleading representations.” However, the SEC claimed that sanctions are not warranted, adding that it will “conduct mandatory training” for staff involved to avoid similar errors in the future.
SEC ‘Deeply Regrets’ the Errors Made in Debt Box Case
The U.S. Securities and Exchange Commission (SEC) filed its response to an order to show cause in the case against crypto firm Debt Box on Thursday.
The United States District Court for the District of Utah issued an order to show cause in the SEC v. Digital Licensing Inc. dba Debt Box, et al. case on Nov. 30, demanding the securities regulator justify its actions. The court called out the SEC for making “materially false and misleading representations” and warned of potential sanctions if the regulator fails to provide adequate justification.
“The Commission and its attorneys fell short of that expectation here,” Thursday’s filing states. “Commission counsel made a representation during the July 28, 2023 hearing that, unbeknownst to him at the time, was inaccurate. Commission attorneys failed to correct that statement when they learned of the inaccuracy. Commission counsel also failed to make clear that certain representations were inferences from the facts known to them rather than directly supported factual assertions.” The attorneys for the SEC wrote:
The Commission takes this court’s concerns seriously and deeply regrets these errors.
The filing then details how the SEC plans to rectify the situation. “Agency officials are taking steps to ensure those errors are not repeated in this action or other proceedings. Among other measures, the Enforcement Director has assigned senior attorneys from the Commission’s Denver Regional Office to supervise this matter going forward and has assigned an experienced trial attorney from the Denver Regional Office to lead the litigation team,” the SEC detailed.
“The Division of Enforcement will also conduct mandatory training for all Division staff involved in investigations and litigation about the duty of accuracy and candor and the duty to correct any inaccuracies as soon as they come to light,” the filing notes. Nonetheless, the SEC told the court:
The Commission respectfully submits that sanctions are not warranted.
“The circumstances here fall short of the misconduct Rule 11 was intended to address, and Commission staff have not engaged in any bad faith conduct that could support sanctions under the court’s inherent authority,” the SEC’s legal counsel claimed.
What do you think about the SEC stating that it “deeply regrets” the errors but claiming that sanctions are unnecessary? Let us know in the comments section below.
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