SEC Acknowledges Inaccurate Statements in Utah Crypto Lawsuit

The Securities and Exchange Commission (SEC) admitted that it had made false statements in its legal brawl with crypto startup DEBT Box. However, the regulator is not shifting its defense on its move to keep the company’s assets frozen.

The controversy flared, as in November, Utah’s top federal judge Robert J. Shelby chastised SEC lawyers for how they were prosecuting the case. Judge Shelby required a strong basis for the SEC to ask for a restraining order against DEBT Box that would essentially freeze its property.

Inaccuracies Exposed: SEC’s Admission

The SEC argued that DEBT Box was trying to offshore all of its assets so that the area by which the regulator could not reach it, an allegation that caused glances in court. In response to the judge’s concerns, the SEC said in a court filing on Thursday that it had misstated some of its accusations by mistake to strengthen the restraining order case.

The admission conceded that the SEC had made wrong assertions about DEBT Box closing numerous accounts in the ongoing litigation. Besides promptly neglecting to correct its initial misstatements, the regulatory body admitted to having “fallen short” in accuracy and honesty within courts.

The SEC would then insinuate that it had acted in good faith and, even with these revelations, continued defending its request for the restraining order. In response to the situation, the agency stated that it has implemented measures to address such cases in the future.

The Commission’s regional office in Denver appointed two senior legal professionals in charge of the case as an act of commitment. The SEC Division of Enforcement is set to enforce mandatory training for its workforce, focusing on accuracy and honesty. Additionally, it is mandated to correct any inaccuracies that arise promptly.

SEC’s Corrective Measures

The DEBT Box lawsuit accuses the crypto startup of making fraudulent claims and defrauding thousands of investors. The alleged misconduct resulted in losses totaling $49 million. DEBT Box issued “node licenses” purporting to provide returns from mining activities. However, the company did not conduct or engage in any mining business, according to the allegations.

The SEC asserts that DEBT Box made false claims about having a legitimate business. The regulator alleges that the startup is attempting to relocate assets abroad to impede the ongoing investigation. The SEC lifted the obtained restraining order in October of the previous year. The court ruled that the regulator had not adequately substantiated the claims.

The case’s developments raise doubts about the SEC’s oversight and the accuracy of its legal claims. This underscores the challenges in regulating the rapidly growing crypto sector. The lawsuit against DEBT Box will unfold in the limelight. Stakeholders watch how the SEC grapples with and corrects breaches and blunders in their lawsuits.

Related Reading | Ripple CLO Discloses SEC’s XRP Settlement Offer Before 2020 Lawsuit