A US Judge has imposed sanctions on the SEC for acting in bad faith & abusing power in a case against crypto firm TheDebtBox. The SEC brought a lawsuit against the Utah-based crypto company in July 2023. Defendants at TheDebtBox accused the commission of misrepresenting important facts when the agency got a temporary restraining order to freeze assets on the platform.
US District Judge Robert Shelby ordered the SEC to explain its actions in the lawsuit. Lawyers for the SEC revealed that the SEC indeed committed errors. However, they also asked for no formal punishment to be placed on the SEC.
The case is another added to the list of lawsuits involving the SEC and crypto companies. The regulator has had a long year regarding dealing with the cryptocurrency world, including cases against Ripple Labs and an effort to prolong decisions on crypto ETFs.
On Monday, Shelby denied the SEC’s request for no formal punishment in his decision. Shelby cites multiple instances of “bad faith” conduct. Judge Shelby also found the agency responsible for a “gross abuse of power,” as written in the 80-page filing. “The Commission’s above-discussed conduct constitutes a gross abuse of the power entrusted to it by Congress and substantially undermined the integrity of these proceedings and the judicial process,” the filing reads. “The former is not a matter for this court to consider. But the court has an affirmative obligation to address the latter.”
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“[The SEC’s conduct] substantially undermined the integrity of these proceedings and the judicial process,” Shelby continued. The sanction against the SEC requires the agency to pay TheDebtBox’s attorneys’ fees and costs related to the restraining order. Furthermore, Judge Shelby also denied the SEC’s request to dismiss the lawsuit without prejudice. This prevents the commission from reigniting the lawsuit at a later date.
The SEC is currently reviewing the judge’s decision and has yet to comment further on Monday’s ruling.