Judge Mulls Sanction For SEC
The United States Securities and Exchange Commission has come under scrutiny from Judge Robert Shelby of the US District Court for the District of Utah over misleading information against a crypto firm. Hence, the attorney has warned the SEC lawyers over the penalties issued in response to allegations of misleading statements in the commission’s case against Digital Licensing Inc., also known as DEBT Box.
According to the SEC’s lawsuit, DEBT Box defrauded investors of approximately $50 million by selling unregistered securities, which the regulator called “node licenses.” However, Judge Shelby expressed concern about the SEC’s alleged deceptive tactics throughout the proceedings.
The judge’s remarks included a stern warning to SEC attorneys, implying that there would be severe consequences if the issue of misleading statements persisted.
SEC’s Deceptive Tactics
Judge Shelby’s decision casts doubts over the SEC’s case against DEBT Box following close observation. The SEC initially convinced the court to freeze DEBT Box’s assets through its legal representative, claiming that the company was relocating to Dubai, which would be out of reach of United States regulatory bodies.
However, the court later discovered that these claims, as presented by the SEC, were false, with no bank accounts closed and an alleged $720,000 overseas transfer, which turned out to be local. Reacting to the conduct of the SEC lawyers, Judge Shelby states that the regulator’s claim is a misrepresentation of facts and a failure to correct inaccuracies.
According to the judge, this may have violated federal court Rule 11(b), which requires evidence-based claims before a court. As a result, Shelby issued a “show cause” order, demanding that the securities watchdog explain why it should not face sanction for its action.
SEC’s Claims Against DEBT Box
According to a TRM Labs report, the US regulator charged DEBT Box and 18 other defendants with engaging in a fraudulent scheme to sell digital asset securities to US investors. The SEC claimed that the firm raised $50 million from the token sales, including unspecified amounts of BTC and ETH.
According to the SEC, DEBT Box used a strategy to sell mining licenses in exchange for tokens allegedly tied to actual commodities such as crude oil or gold. The regulator added that the defendants convinced investors that the node licenses would generate crypto tokens through mining activities.
It also revealed that revenue generated from businesses in several sectors would drive the value of the various tokens the company mined, leading to massive profits for investors. However, the SEC’s report claimed that the node licenses were a ruse designed to hide the fact that the total supply of each token was created instantly by DEBT Box using code on a blockchain.
Responding to the ongoing case, Ripple lawyer John E. Deaton has requested that the SEC be subpoenaed, claiming that this was not the first time the financial regulator had been caught lying. Also, Stuart Alderoty, Ripple’s chief technology officer, echoed Deaton’s sentiments, citing troubling patterns observed with the SEC’s actions.