The U.S. Securities and Exchange Commission (SEC) filed a lawsuit in July in the Debt Box case, alleging “misrepresentation” and misleading the judge to freeze the company’s assets. In recently released court documents, the SEC admitted to lying and expressed remorse, but they insisted that their actions were in good faith and reasonably requested a restraining order.
The SEC, without providing clear cryptocurrency regulatory rules, prioritized enforcement and even resorted to making “misrepresentations” to mislead the judge to ensure the validity of their sanctions in court.
In July, the SEC applied to the court to freeze the assets of Debt Box, claiming that Debt Box (Digital Licensing Inc.) closed 33 bank accounts two days before the hearing. This action was seen as “key evidence” that Debt Box was attempting to transfer funds overseas, successfully misleading the judge to issue a temporary restraining order and freeze the company’s assets.
However, this order was withdrawn in October because Judge Robert Shelby found, after investigation, that the facts were not as described by the SEC. This prompted him to issue a stern warning to the SEC’s lawyers on November 30, stating that their “misrepresentations” not only undermined the legitimacy of the case but also caused irreparable damage to Debt Box. The judge ultimately demanded a response from the SEC’s lawyers within two weeks, or they could face court sanctions.
The SEC admitted to lying but opposed the judge’s sanctions. On the 21st, the SEC admitted in its court documents that inaccurate statements were made to support the issuance of a restraining order against Debt Box. The SEC expressed deep regret for these mistakes and promised not to repeat them in future litigation.
In response, the SEC took corrective measures by assigning a senior lawyer from its Denver office to oversee the case and providing mandatory training on accuracy and candor to its staff.
However, despite their regret, the SEC still insisted that their actions were in good faith and reasonably requested the restraining order. The SEC stated that they believed it was unreasonable for the judge to impose sanctions on them.
According to the SEC’s statement, they charged Debt Box and its principal executives and other defendants with unregistered sales of so-called “node licenses” since 2021, defrauding investors of approximately $50 million and an undisclosed amount of Bitcoin and Ethereum.
Additionally, the SEC accused Debt Box of lying to investors in various aspects of its business, including false claims of engaging in cryptocurrency mining. Therefore, the SEC seeks a permanent injunction, the return of allegedly illegally obtained profits, and civil penalties.
On its website, Debt Box claimed to be a decentralized and environmentally friendly blockchain platform, promoting the idea of “combining cryptocurrency with commodities.” The company offered so-called “node licenses” for sale, which required activation before mining began.
The platform promised daily rewards through various “projects” that appeared to involve multiple industries, including real estate, commodities, agriculture, and technology.
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