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Utah’s top federal judge said lawyers for the US Securities and Exchange Commission (SEC) made “false or misleading” statements in connection with its case against crypto firm DEBT Box and ordered the regulator to show why it should not be sanctioned.
Judge Robert J. Shelby wrote in a court filing on Nov. 30 that he was “concerned the Commission made materially false and misleading representations” in arguing for a technical restraining order (TRO) against DEBT Box.
👀SEC Sanctions👀
11/30/2023 “Court orders SEC to show cause why it should not be sanctioned for making false and misleading representations to the Court. SEC v Debt Box” pic.twitter.com/F1c0QloC0E— Cowboy.Crypto (@cowboycrypto313) December 1, 2023
One of the SEC’s claims was that DEBT Box was actively in the process of moving assets overseas. The agency alleged the firm closed its bank accounts in June 2023 to “move investor funds” to the United Arab Emirates in what appeared to be an attempt to evade federal securities laws.
In a July filing, it also said that DEBT Box had closed 33 bank accounts in the previous 48 hours. This was supposedly “the most significant evidence” that DEBT Box was attempting to move funds overseas.
The SEC also stated that the defendants were blocking investigators from viewing social media pages. Given the claims, judge Shelby decided to approve the TRO.
But in a motion to dissolve the TRO in September, the defendants argued that zero bank accounts were closed in June or July of this year. They said they had closed thirteen of the bank accounts in question on or before January 2023. Another nine accounts were also closed by banks, not the defendants.
Following this argument, Shelby wrote that there was “no evidence that any bank accounts closed in the 48 hours preceding the ex parte hearing.”
The SEC May Be Fined
Shelby has ordered the SEC to argue why sanctions should not be imposed upon the Commission’s lawyers. He also laid out several questions for the agency regarding the evidence it used to support its assertions in court.
Sanctions may include monetary penalties, but could also be limited to “directives of a nonmonetary nature.”
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