Lawyers representing the United States Securities and Exchange Commission (SEC) have responded to allegations in court that they created a false narrative to prevent the dismissal of an enforcement action against a mining software company. According to court documents, the SEC failed to correct the misrepresentation of facts presented to obtain a temporary restraining order to freeze assets.
During a hearing on December 21st in the U.S. District Court for the District of Utah, the SEC admitted to inaccuracies in prior court filings which claimed that the software firm Debt Box had closed some bank accounts and planned to relocate to the United Arab Emirates to escape the commission’s jurisdiction. The SEC expressed deep regret for these errors and assured that steps are being taken to prevent such mistakes from recurring in this and other cases.
SEC Enforcement Director Gurbir Grewal issued a separate statement apologizing on behalf of the commission and acknowledged that the standards for presenting accurate evidence to the court were not met. He announced that the enforcement division would undergo additional training starting January 2024.
The case gained attention due to an SEC lawsuit filed in July, alleging that Debt Box conducted a $50 million illegal crypto scheme. The court initially granted the SEC a temporary restraining order in August to freeze the company’s assets. However, the court reversed its decision in November after determining the SEC had misrepresented evidence regarding Debt Box’s bank accounts and intentions to move to the UAE.
Judge Robert Shelby, overseeing the SEC’s lawsuit against Debt Box, suggested that the commission could face sanctions due to its misrepresentations. The SEC believes that no sanctions are necessary as its staff did not act with any malicious intent. The commission admitted its representatives failed to accurately describe the basis for their factual claims and did not properly identify or explain the inferences upon discovering the inaccuracies.
On December 4th, Debt Box’s lawyers accused the SEC of making false claims in previous filings and failing to meet the fundamental defense standards for the case. The lawsuit has caught the attention of many in the crypto space, including representatives of firms facing SEC sanctions. Ripple‘s Chief Technology Officer David Schwartz commented on the issue, highlighting the urgency of the SEC’s extraordinary relief request that did not allow the other party to be heard. The SEC’s admission and the allegations against Debt Box represent a rare warning from a court while the commission pursues numerous enforcement actions, including cases against Terraform Labs, Binance, Coinbase, Ripple, Kraken, and others.