SEC asks to toss Debt Box suit after court threatens sanctions

The United States securities regulator is seeking to dismiss a lawsuit it launched against a crypto company after a federal court issued an order mandating the agency provide reasons why it should not incur penalties for lying.

In a Jan. 30 court filing to a Utah District Court in its case against Debt Box, the Securities and Exchange Commission said it “has determined that the best way to proceed is to dismiss this action without prejudice.”

“While the Commission recognizes that its attorneys should have been more forthcoming with the Court, sanctions are not appropriate or necessary to address those issues.”

The SEC initially claimed Debt Box perpetrated a $50 million fraudulent crypto scheme amid its operations as a software mining license provider.

In August, it won a restraining order to freeze Debt Box‘s assets after claiming the firm had already sent $720,000 overseas and would flee to the United Arab Emirates and secretly transfer more assets with it if it was notified of the order.

However, Judge Robert Shelby, overseeing the case, reviewed his initial order and concluded the SEC misrepresented evidence and that the $720,000 transfer was instead sent within the United States.

In December, Judge Shelby gave the SEC a “show cause order” — a type of court order that requires a party to justify, explain or prove something to the court.

The SEC is now asking the court to reject Debt Box’s request for additional sanctions.

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A dismissal with prejudice is “an extreme sanction appropriate only in cases of willful misconduct,” the SEC said. “No such willful misconduct occurred here.”

Related: Cryptocurrency versus the SEC: A fight for fair digital investing

“The SEC got this case wrong. Badly wrong,” lawyers for Debt Box told Judge Shelby in a Dec. 4 motion to dismiss.

“The SEC should not be allowed to continue to spin a false narrative to avoid dismissal.”

An SEC spokesperson told Cointelegraph it declined to comment beyond the public filings.

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