SEC ‘deeply regrets’ mistakes related to crypto firm enforcement case

Lawyers representing the U.S. Securities and Exchange Commission have responded in court to a lawsuit they say peddled a “false narrative” to dismiss an enforcement case against a mining software company.

On December 21 in the U.S. District Court for the Northern District of Utah, the SEC, in an earlier court filing, closed certain bank accounts of software company Debtbox and attempted to flee the commission's jurisdiction in the United Arab Emirates. According to the filing, the SEC failed to correct misrepresentations of facts presented to the court to obtain a temporary restraining order to block the assets.

“The Commission takes this court's concerns seriously and deeply regrets these errors,” the SEC said. “Agency officials are taking steps to ensure that those mistakes are not repeated in this action or in other proceedings.”

In a separate statement, SEC Enforcement Director Gurbir Grewal apologized on behalf of the commission.[fallen] Short” steps to present the correct evidence to the court. He said the enforcement unit will have additional training from January 2024.

The case stems from a July lawsuit filed by the SEC alleging that DebtBox executed an illegal $50-million crypto scheme. In August, the court granted the SEC a temporary restraining order to freeze the company's assets. However, the commission reversed its decision in November after ruling that it had seized evidence of Debt Box's bank accounts and plans to move to the UAE.

Judge Robert Shelby, who supervises the SEC on the debt fund, indicated that the commission could be sanctioned due to inaccurate statements. According to the SEC, sanctions were not warranted because employees did not engage in “any bad faith conduct”:

“Commissioners failed to properly articulate the basis for their findings, identify and explain their recommendations, and fail to identify inaccuracies in those assertions once they were found.”

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On December 4, Debtbox's attorneys filed a motion to dismiss the SEC's earlier filings, citing false allegations and “failures.”[ed] The case has drawn attention from many in the crypto space, including representatives of companies facing enforcement action by the SEC.

“In most cases [the SEC’s admission] It won't be that big of a deal because the other side will argue the other side,” Ripple's Chief Technology Officer David Schwartz responded on December 22nd. But here, this urgent, extraordinary relief with the SEC was an ex ante 'emergency' proceeding that did not give the other side an opportunity to be heard.

The SEC's entry and debt-box claims were a seemingly unusual rebuke by the court, as the commission oversees a number of enforcement cases. The Commission has pending civil cases against Terraform Labs, Binance, Coinbase, Ripple, Kraken and others.

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