The Securities and Exchange Commission (SEC) has been ordered by Utah’s top federal judge to account for statements made in its efforts to enforce and maintain a temporary restraining order (TRO) against cryptocurrency company DEBT Box, new court filings show.
TRO was dissolved last October after Judge Robert J. Shelby, chief judge of the U.S. District Court for the District of Utah, found some of the SEC’s statements calling the order “false or misleading.”
The SEC alleged that at the time, DEBT Box was in the process of actively moving assets overseas to escape the SEC’s jurisdiction, and closed bank accounts in June 2023 to move “investor funds” offshore to the United Arab Emirates for express purposes. . “The intent is to circumvent federal securities laws.”
In additional details explaining his order, Shelby described the SEC’s assertion at the July 28 TRO hearing that defendants closed 33 bank accounts in the past 48 hours as the “most significant evidence” that DEBT Box attempted to move. I did. Overseas funds. This evidence, along with the SEC’s statement that the defendants were blocking investigators from viewing certain social media pages, helped convince the judge to grant the TRO.
However, the defendants claimed in the TRO dissolution application filed last September that there were actually zero bank accounts closed in June or July 2023. Rather, it was claimed that all 13 of the defendants’ bank accounts that had been closed were closed. On or before January 2023 — and nine of the accounts were closed by banks other than the defendants.
“There is no evidence that any bank account was closed in the 48 hours prior to the ex parte hearing,” Shelby wrote in the filing.
Shelby also found the SEC’s characterization of the defendants’ statements misleading and questioned the SEC’s claim that the defendants were blocking investigators from viewing certain sites, given that the SEC classified the investigation as “secret.” I raised a question.
possible sanctions
Judge Shelby wrote that, in the context of asserting the TRO, “…we are concerned that the Commission has made materially false and misleading statements.” Shleby also noted that the TRO was an “extraordinary relief” that resulted in the appointment of a “temporary receiver vested with full authority over all funds, property, collateral, and buildings.” . . You have physically selected books, records, papers and other property belonging to DEBT Box, its affiliates and subsidiaries.
So Shelby ordered the SEC to argue why sanctions should not be imposed on the commission’s attorneys, and posed several questions to the agency regarding the evidence it used to support its claims in court. For example, Shelby wrote: “If the investigation was conducted covertly, what factual support did the defense have and rely on on behalf of the defendant to take steps to block SEC investigative staff from viewing the social media sites?”
Sanctions, which “shall be limited to a degree sufficient to deter repetition of such conduct,” can include monetary penalties, but can also be limited to “directives of a non-monetary nature,” according to federal rules cited by Shelby. The agency’s response is expected within 14 days, and a spokesperson told Fortune: “We have been ordered to show cause and will respond as directed by the court.”
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