SEC Seeks to Withdraw Lawsuit Against Crypto Lender Debt Box

The U.S. Securities and Exchange Commission (SEC) has moved to withdraw ts lawsuit against cryptocurrency lending platform Debt Box after facing sharp criticism from a federal judge overseeing the case. The judge had questioned the SEC’s conduct and threatened sanctions if the regulator did not provide sufficient justification for alleged misrepresentations made in court.

🚨NEW: The @SECGov has just filed a brief in the @DebtBox case saying that it intends to dismiss the lawsuit against the company.The SEC is choosing dismissal rather than face possible sanctions from the judge for misleading the court in order to secure a restraining order and…

— Eleanor Terrett (@EleanorTerrett) January 30, 2024

The SEC originally filed the lawsuit in August 2023, accusing Debt Box and its executives of perpetrating a fraudulent $50 million scheme by selling fake software licenses for crypto mining. The regulator managed to freeze Debt Box’s assets at the time by claiming the company was improperly transferring funds overseas. 

In December, though, Judge Robert Shelby took issue with the SEC’s stance, saying it misled the court about certain details. Specifically, the $720,000 asset transfer highlighted by the SEC occurred domestically rather than internationally. Citing this and other discrepancies, the judge demanded that the SEC justify its actions or face potential sanctions.  

With the threat of penalties looming, the SEC submitted a filing Tuesday announcing its intent to dismiss the case without prejudice. The agency admitted its attorneys could have been more transparent but argued sanctions were unnecessary. The SEC maintains it can revive the lawsuit later if further evidence against Debt Box emerges.

Predictably, Debt Box’s legal team criticized the SEC’s response as an attempt to save face rather than take accountability to assert the regulator invented a false narrative against Debt Box to justify improperly freezing the company’s assets. Unless the judge imposes harsh sanctions, observers say the SEC may try similar questionable tactics in future crypto cases.

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2024-01-31 12:20