SEC Acknowledges Missteps in DEBT Box Lawsuit

SEC Enforcement Director Gurbir Grewal acknowledged that federal lawyers did not meet expected standards in their lawsuit against cryptocurrency startup Digital Licensing. This admission followed criticism from a Utah court.

The U.S. Securities and Exchange Commission (SEC) admitted to making false statements in its enforcement action against blockchain company DEBT Box, accusing it of defrauding investors of nearly $50 million. During a July 28, 2023 hearing, an SEC lawyer unknowingly made an incorrect statement, which was not rectified even after the error was discovered.

In response to Judge Robert J. Shelby’s order, the SEC filed a 27-page document addressing its misleading claims in seeking a restraining order against DEBT Box. The company offered node licenses for mining revenue without requiring actual mining setups, but the SEC claimed DEBT Box falsely presented itself as a legitimate business.

The SEC accused DEBT Box of moving assets abroad during litigation to avoid U.S. legal jurisdiction. Although a restraining order was initially granted, it was later revoked in October.

Grewal stated that the SEC is implementing corrective measures, including staff training and assigning senior attorneys to the case. Despite this, the SEC opposed sanctions and argued for the continued freezing of the company’s assets.

The situation has sparked reactions in the crypto community, highlighting the SEC’s aggressive approach under Chairman Gary Gensler, perceived as favoring lawsuits over clear regulations.

Coinbase appealed to the SEC for definitive rule-making regarding cryptocurrencies, but the request was denied, with existing financial regulations considered adequate for overseeing digital assets.

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