A federal judge has imposed sanctions on the Securities and Exchange Commission in a case involving a Utah-based cryptocurrency company, according to Reuters.
Last July, the SEC petitioned for a temporary restraining order and an asset freeze against blockchain technology firm DEBT Box. Regulators cited a YouTube video in alleging that the company had suddenly moved assets to foreign banks as an indication of attempting to evade enforcement of U.S. securities laws.
Last week, Utah U.S. District Court Chief Judge Robert J. Shelby ruled that the SEC attorneys presented misleading evidence to obtain the restraining order, failed to correct the record when given the chance, and that the commission engaged in “gross abuse of the power entrusted to it by Congress.”
The judge, who accused the SEC of acting in bad faith, ordered the regulator to pay DEBT Box and codefendants’ attorneys’ fees and any other legal costs associated with the temporary restraining order and asset freeze. In an 80-page ruling, Shelby wrote, “The court makes clear that, while it might hope the commission would hold itself to a higher standard of conduct, the court does not impose an elevated standard here. It simply expects the commission to comport with the same duties and obligations as every other litigant coming before the court.”
But Shelby said his action only focused on the SEC’s conduct and should not be construed as offering any views on the underlying merits of the case.
An SEC spokesperson said the agency is reviewing Shelby’s decision. Attorneys for the SEC said in earlier filings that they did not intend to mislead the court, and argued there is still evidence DEBT Box has harmed investors.
The initial complaint filed against DEBT Box and about two dozen associated individuals and business entities last summer, alleging the company amassed fraudulent earnings and lied to investors about virtually every aspect of their business.
DEBT Box, otherwise known as Digital Licensing, Inc., offers investors the opportunity to buy software “nodes” and build their own blockchain network using less energy than traditional crypto mining.
The SEC alleged that rather than use the investor funds generated from the sale of the node software licenses to support those underlying businesses, “defendants misappropriated the funds for their own personal gain — buying luxury vehicles and homes, taking lavish vacations, and showering themselves and their friends with cash.”
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