Coindesk Logo

SEC Committed 'Gross Abuse of Power' in Suit Against Crypto Company, Federal Judge Rules

SEC Committed 'Gross Abuse of Power' in Suit Against Crypto Company, Federal Judge Rules

SEC Committed 'Gross Abuse of Power' in Suit Against Crypto Company, Federal Judge Rules

The regulator will be required to pay attorneys' fees for the defendants.

The regulator will be required to pay attorneys' fees for the defendants.

The regulator will be required to pay attorneys' fees for the defendants.

AccessTimeIconMar 18, 2024, 11:30 PM
(Nikhilesh De/CoinDesk)
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global event for everything crypto, blockchain and Web3.Register Now

A federal judge ruled that the U.S. Securities and Exchange Commission must pay legal costs for DEBT Box, a Utah-based crypto company the SEC brought a suit against, finding that the regulator had committed a "gross abuse of power" in its efforts to secure a temporary restraining order.

The SEC sued the crypto project last year alleging fraud, securing a temporary asset freeze and restraining order against the company. According to the SEC, DEBT Box was telling customers it was selling licenses to mine cryptocurrency, but was in reality just creating tokens with code. DEBT Box filed to dissolve the temporary restraining order, claiming the SEC had misled the court about the company moving its funds and closing its bank accounts.

In an order Monday, Chief Judge Robert Shelby, from the District of Utah, wrote that the SEC's attorneys misled the court both in applying for a temporary restraining order as well as afterward, when DEBT Box filed to dissolve the order, noting at the end that the order is focused on the TRO question, and not the underlying case.

The SEC will be required to pay defendants' and receivers' fees as part of the court's sanctions, the judge wrote.

"Each piece of support the Commission offered in seeking the TRO – and then later reiterated in defending the TRO – proved to be some combination of false, mischaracterized, and misleading," the order said. "Further, the Commission not only repeated and affirmed its misrepresentations in the face of contrary evidence, it presented new falsehoods to the court in an effort to subtly shift from its previous misrepresentations without acknowledging its previous errors."

An SEC spokesperson said the agency was "reviewing the decision."

Edited by Kevin Reynolds.


Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

Nikhilesh De is CoinDesk's managing editor for global policy and regulation. He owns marginal amounts of bitcoin and ether.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.