U.S. Judge Issues Stern Warning to SEC in Crypto Legal Battle

A US judge issues a strong warning to the SEC as the legal battle over cryptocurrency intensifies

Lawyers for the Securities and Exchange Commission (SEC) were forewarned by a federal judge on Thursday that they would face consequences if they persuaded a court to freeze a cryptocurrency firm's assets using "false and misleading" arguments, according to a court document.

The SEC's lawyers may face sanctions for making "misleading" claims regarding the purported attempts of the cryptocurrency project Debt Box to transfer its assets and investors' money abroad, which prompted the court to freeze the project's bank accounts, as per an order made by U.S. District Judge Robert Shelby of the U.S. District Court in Utah. In addition to suffering Debt Box "irreparable harm," Judge Shelby's order stated that the SEC's "misrepresentations... undermined the integrity of the case's proceedings."

According to the legal dictionary on Law.com, sanctions are fines a court imposes on people who sign documents they know to be false or who otherwise disobey court orders. According to Law.com, fines are often a form of sanction in civil law.

In August, a federal judge initially issued a temporary restraining order against Debt Box, limiting its ability to access its assets. Debt Box's attorneys filed that the judge eventually dissolved the order after the company showed that it had not closed its bank accounts or transferred money outside of the United States, as requested by the SEC, two days before the hearing on the request to freeze its cash. A request for comment from the SEC's Utah office was not immediately answered.

First filed in July, the SEC's lawsuit against Debt Box said the corporation had a plan to start selling unregistered securities, or "node licenses," in 2021. Debt Box misled investors into believing that the licenses would be used to mine cryptocurrency, which would increase in value. However, the SEC said in its initial lawsuit that Debt Box was employing computer code to mint the coin.