The U.S. Securities and Exchange Commission (SEC) is moving to withdraw a lawsuit it initiated against the cryptocurrency company Debt Box. This decision comes in the wake of a federal court’s directive, which required the SEC to explain why it should not face penalties for misrepresenting facts in the case.
In a recent filing dated January 30 with a Utah District Court, the SEC expressed its intention to dismiss the lawsuit against Debt Box “without prejudice.” The lawsuit originally accused Debt Box of conducting a fraudulent crypto scheme, allegedly involving $50 million, under the guise of operating as a software mining license provider.
The SEC had previously secured a restraining order to freeze Debt Box’s assets in August. This action was based on the SEC’s claim that the company had transferred $720,000 overseas and planned to flee to the United Arab Emirates, potentially moving more assets secretly if notified of the order. However, Judge Robert Shelby, who is presiding over the case, reassessed his initial order and found that the SEC had misrepresented the evidence. He determined that the $720,000 transfer had occurred within the United States, not internationally as the SEC had claimed.
In December, Judge Shelby issued a “show cause order” to the SEC. This type of court order requires a party to provide justification, explanation, or proof for something to the court. Following this, the SEC is now requesting the court to dismiss Debt Box’s plea for additional sanctions against the agency.
The SEC maintains that dismissing the case with prejudice – a severe penalty typically reserved for cases of willful misconduct – is not warranted here, as they argue no such misconduct occurred. On the other hand, Debt Box’s legal representatives have strongly criticized the SEC’s handling of the case. In a motion to dismiss filed on December 4, they accused the SEC of severely misjudging the case and urged that the agency should not be permitted to continue propagating a misleading narrative to avoid dismissal.
As of now, an SEC spokesperson has indicated that the agency will not comment beyond what has been stated in the public filings.
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