KEY POINTS
- Debt Box said the SEC wants to "just walk away from a case" while it doesn't allow defendants to fix their mistakes
- The SEC sued Debt Box in mid-2023 over its alleged illegal overseas transfer of investors' funds
- A judge found some of the SEC's presentations in court "false or misleading"
Blockchain project Debt Box on Wednesday moved to block the U.S. Securities and Exchange Commission's (SEC) motion to get its lawsuit against the crypto firm dismissed.
In an opposition motion filed Wednesday, Salt Lake-based Digital Licensing, which operates under the business name Debt Box, the project said the SEC "wants to exit this action under its own terms while retaining the option to re-file another enforcement action against the Debt Box Defendants and other defendants at some undetermined time in the future, and perhaps in a different forum – as if nothing happened in this case."
They also said the SEC "wants a double standard," wherein it wants to be "treated differently before federal courts than those that it regulates or attempts to regulate."
The regulator sued Debt Box in July 2023 and was granted a temporary restraining order (TRO) against the defendant's assets about a month later. In its lawsuit, the SEC said Debt Box illegally moved assets and investor funds overseas and schemed to sell unregistered securities in the U.S.
U.S. Chief District Judge Robert Shelby dissolved the asset freeze order after he found some of the regulator's statements in for the order request "false or misleading." Shelby threatened potential sanctions against the SEC, including possible monetary penalties and potential "directives of a nonmonetary nature."
The SEC admitted in December that its attorneys "should have been more forthcoming with the Court," adding that sanctions were not necessary. It then asked for the case to be dismissed "without prejudice" and said it was reviewing allegations and evidence on the case.
It said it took measures to correct its shortcomings, including the designation of senior attorneys from its Denver Regional Office to supervise the case. Debt Box doubts the move will have a significant impact.
"Promises to 're-staff' a team or to provide additional ethics training do not lead the SEC to just walk away from a case. Undoubtedly, the SEC does not permit any defendants a 'do-over' to fix their wrongdoings, consequence-free," the defendants said Wednesday.
Debt Box's move comes a day after Republican senators wrote to SEC chair Gary Gensler, criticizing the regulator for its "unethical and unprofessional" handling of the said case.
"It is unconscionable that any federal agency – especially one regularly involved in highly consequential legal procedures and one that, under your leadership, has often pursued its regulatory mission through enforcement actions rather than rulemakings – could operate" in a negligent manner, the senators said.
The regulator has also come under fire for its controversial Staff Accounting Bill (SAB) 121, which places restrictions on companies that seek to have custody of their clients' cryptocurrency assets.
Two House representatives called out the SEC's bulletin, saying it "goes beyond the scope of an accounting bulletin and is effectively a rule."
