A United States district court has issued sanctions against the Securities and Exchange Commission (SEC) for displaying “bad faith” in its lawsuit against Debt Box. The SEC initially filed a motion to dismiss the case, but Judge Robert J. Shelby denied it and criticized the regulator for intentionally deceiving the court regarding evidence used to obtain a temporary restraining order and asset freeze against Debt Box in August of last year. Judge Shelby stated that the SEC’s behavior constituted an abuse of power and undermined the integrity of the legal proceedings. The evidence presented by the SEC was found to be baseless and intentionally misleading. As a result, Judge Shelby deemed it appropriate to impose sanctions on the SEC, including payment of attorneys’ fees and costs incurred due to their misconduct.
In the lawsuit filed in August, the SEC accused Debt Box of engaging in a $50-million fraudulent cryptocurrency scheme while operating as a software mining license provider. The SEC requested the temporary restraining order and asset freeze, claiming that Debt Box had already transferred $720,000 overseas and would continue to move assets to the United Arab Emirates if notified of the court order. Initially, the request was granted. However, upon further review, Judge Shelby discovered that the SEC had misrepresented the evidence and that the $720,000 transfer had actually taken place within the United States.
In December, Judge Shelby issued a “show cause order” to the SEC, demanding an explanation for its actions. While the SEC acknowledged its lack of transparency, it argued against the imposition of sanctions. Judge Shelby specifically criticized SEC attorney Michael Welsh for misleading the court and attempting to confuse the issue.
Austin Campbell, founder of Zero Knowledge Consulting, expressed the opinion that the SEC staff involved should be terminated and that the agency itself needs to undergo reform.