The SEC finds itself in a legal predicament as court documents reveal potential misconduct regarding evidence presentation, which could lead to sanctions.
DEBT Box, a company primarily offering crypto mining software, faced legal action by the SEC last year. The regulator alleged that DEBT Box had defrauded investors by selling unregistered securities, amounting to $50 million. DEBT Box operates an ecosystem alongside its software and has its own token, DEBT, used for payments within the ecosystem.
In August, the SEC requested an asset freeze for DEBT Box, citing evidence of a $720,000 transfer to foreign bank accounts, putting users’ funds at risk. This request was filed ex parte, meaning DEBT Box was not informed or able to challenge it in court. The SEC claimed that DEBT Box’s lawyers were attempting to obstruct their request.
However, subsequent evidence revealed that the asset transfer was domestic, leading to the lifting of the asset freeze. DEBT Box’s lawyers promptly sought a case dismissal. Surprisingly, the SEC also requested a dismissal, albeit with milder sanctions than those sought by the defendant.
The SEC’s lawyers now face a “Show Cause” request, meaning they must justify their actions or face penalties. The SEC contends that the false evidence was unintentional and based on a YouTube video by one of the defendants, arguing against harsh penalties but supporting the case’s dismissal.
The outcome of this legal dispute will determine whether the SEC faces sanctions for its handling of evidence in the case against DEBT Box.