Regulation
The SEC will refund $1.8 million after a cryptocurrency lawsuit fails
A U.S. district court judge has ordered the Securities and Exchange Commission (SEC) to reimburse DEBT Box, a cryptocurrency company, nearly $1.8 million in legal fees.
This order follows the dismissal of the SEC’s lawsuit against DEBT Box, which had alleged fraudulent activities involving $50 million in sales.
The case was dismissed without prejudice, leaving the door open for potential future actions, but not without the court highlighting the SEC’s missteps and misrepresentations during the trial.
The SEC’s initial lawsuit against DEBT Box included an asset freeze based on an ex parte restraining order, which was later determined to have been obtained through misrepresented facts.
Judge Robert Shelby’s ruling not only requires the SEC to cover DEBT Box’s legal fees, but also serves as a criticism of the agency’s conduct.
The SEC will pay approximately $1 million in legal fees and $750,000 in receiver fees, reflecting the financial burden of the case on the cryptocurrency firm.
Despite a apologies by SEC enforcement chief Gurbir Grewal, the judge insisted on imposing sanctions, rejecting the idea that the SEC’s actions were simply oversights.
The SEC’s failed lawsuit against DEBT Box began with serious allegations of defrauding investors through the sale of unregistered securities.
However, the SEC’s procedural behavior, characterized by the use of misleading statements to obtain a restraining order, ultimately led to the dismissal of the charges and the financial penalty imposed on the regulator.