A United States district court has imposed sanctions on the Securities and Exchange Commission (SEC) for engaging in misconduct in a lawsuit against Debt Box. Judge Robert J. Shelby found that the SEC intentionally misled the court about evidence it used to obtain a temporary restraining order (TRO) and freeze of Debt Box’s assets last August.
“The SEC’s 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,” Shelby said in the filing.
The SEC had claimed that Debt Box perpetrated a $50 million fraudulent cryptocurrency scheme. In requesting the TRO and asset freeze, the SEC claimed that Debt Box had already sent $720,000 overseas and would flee to the United Arab Emirates and secretly transfer more assets if it was notified of the order. However, Shelby later reviewed his initial order and concluded that the SEC had misrepresented the evidence. The $720,000 transfer was actually sent within the United States.
Shelby also criticized SEC attorney Michael Welsh for misleading the court and attempting to obfuscate. “Welsh knew his statement from the TRO hearing was incorrect,” Shelby wrote. “Rather than correcting the misstatement, he and the SEC attempted to subtly shift the language to gloss over and perpetuate the misconduct.”
Shelby ordered the SEC to pay Debt Box’s attorneys’ fees and costs for all expenses resulting from the SEC’s misconduct.