The US Securities and Exchange Commission (SEC) has filed a request for dismissal of its lawsuit that it filed against crypto firm Debt Box.
This came after the securities regulator was threatened by a federal judge with sanction due to ‘false and misleading’ statements.
The request
In a court filing on Tuesday, the SEC requested the dismissal of its lawsuit from Judge Robert Shelby of the Northern Division of the Court of Utah without prejudice.
The lawsuit had been filed against Digital Licensing Inc., the parent company of Debt Box. The SEC attorneys said in the filing that sanctions were not appropriate for addressing the issues.
The regulator admitted that its lawyers may not have been forthcoming with the Court, but if the Court does want to impose some sanctions, then it should not go beyond a dismissal without prejudice.
If the Court agrees to dismissal without prejudice, it would enable the SEC to refile charges against the crypto company at a later date.
The SEC alleged in the said lawsuit that Debt Box had defrauded investors by selling unregistered securities for a total of $50 million.
The regulator went as far as getting a restraining order against the company based in Utah.
The lawsuit
It claimed that Debt Box had lied to its investors about almost every material detail of its unregistered securities offering, which included false claims of being engaged in crypto mining.
An ex parte application was obtained by the SEC attorneys, which means the company could not contest the restraining order filed against it in court.
In a court order issued in December, US District Judge Robert Shelby had expressed concerns that the representations made by the SEC in the case were ‘false and misleading’.
The judge also warned that the regulator could face sanctions from the Court from doing so.
In its filing on January 31st, the SEC noted that it was taking action to ensure that the concerns expressed by the Court do not happen again.
This included compulsory training on the importance of ‘candor’.
Enforcement actions
In 2023, the SEC undertook almost two dozen enforcement actions against companies in the crypto space, which is a significant increase from years prior.
Gary Gensler, the chairman of the SEC, alleged that this was due to the ‘rampant misconduct’ in the crypto market.
Some of the companies it has charged include Gemini, Genesis, Kraken, Celsius, Coinbase and Nexo. Civil penalties of $30 million and $22.5 million were imposed on Kraken and Nexo, respectively.
The regulator filed a lawsuit against the Coinbase crypto exchange in June 2023 over its staking service and filed various charges.
These included operating as an unregistered exchange, broker, and clearing house and selling unregistered securities through its staking service.
In January, US District Judge Katherine Poll Failla had expressed concerns about the regulatory body ‘sweeping too broadly’ while applying the securities laws.
This happened in court when lawyers of the Coinbase crypto exchange and the SEC squared off.