A federal judge has ruled that the U.S. Securities and Exchange Commission (SEC) must cover legal costs for DEBT Box, a crypto company based in Utah, after finding that the regulator engaged in a “gross abuse of power” in its pursuit of a temporary restraining order.
Last year, the SEC filed a lawsuit against DEBT Box, alleging fraud and obtaining a temporary asset freeze and restraining order against the company. The SEC claimed that DEBT Box had misled customers by selling licences for cryptocurrency mining while actually generating tokens using code. DEBT Box contested the temporary restraining order, arguing that the SEC had deceived the court regarding the movement of the company’s funds and closure of its bank accounts.
In a ruling on Monday, Chief Judge Robert Shelby of the District of Utah stated that the SEC’s attorneys had misled the court both in their application for the temporary restraining order and in subsequent proceedings when DEBT Box sought to dissolve the order. Judge Shelby emphasised that the focus of the order pertained to the question of the temporary restraining order and not the underlying case.
As part of the court’s sanctions, the SEC will be obligated to cover the defendants’ and receivers’ fees, as outlined by the judge.
The order highlighted that the evidence presented by the SEC in seeking and defending the temporary restraining order was either false, mischaracterized, or misleading. Furthermore, the SEC persisted in affirming these misrepresentations despite contrary evidence and even introduced new falsehoods to subtly alter its previous misrepresentations without acknowledging them.
An SEC spokesperson stated that the agency is currently “reviewing the decision.”