I hope you are all well and had an excellent weekend, welcome to CryptoGod-1’s blog on all things crypto. In this post I will be looking at the recent admission of the SEC to having made inaccurate claims against a cryptocurrency start-up.
SEC Admits Inaccuracies
The Securities and Exchange Commission (SEC) have withdrawn their lawsuit against the cryptocurrency start-up DEBT Box following the admittance that the SEC made inaccurate statements during court proceedings. In July of 2023 the SEC filed a lawsuit against Digital Licensing Inc., operating as DEBT Box but it has now informed Utah U.S. District Court Judge Robert Shelby of its intention to dismiss the case without prejudice. This will allow the SEC to refile at a later date if they wish to do so. In a on Tuesday the 30th of January 2023 the lawyers for the SEC noted:
“The Commission has determined that the best way to proceed is to dismiss this action without prejudice. Thus, the Commission has authorized the filing of a motion to dismiss this action without prejudice, which will be forthcoming.”
In December 2023 the SEC had acknowledged that it had made inaccurate statements in relation to the case, and went on to concede that it had not met the expectations of accuracy and candour in court. Judge Shelby had previously criticised the agency's lawyers for their “false or misleading” statements and demanded an explanation for these. The statements included accusations by the SEC that DEBT Box was attempting to move assets offshore to evade regulatory oversight.
The SEC went on to argue that they are against imposing sanctions on their lawyers, even though they have been ordered to do so by Judge Shelby. The SEC argued that while they can admit their attorneys should have been more forthcoming with the court, they also feel that sanctions were unnecessary to address the issue.
In their lawsuit against the crypto startup DEBT Box, the SEC alleged that the company had defrauded thousands of investors of at least $49 million. This fraud allegedly happened through “node licenses” which allowed owners to receive revenue from mining 11 tokens that were never actually mined. For now the case is shut, however the SEC has the option to revisit the matter in the future.
Throughout 2023 the SEC ramped up its efforts to enforce the cryptocurrency industry by filing a number of lawsuits against crypto firms. SEC chair Gary Gensler consistently asserted that the majority of cryptocurrencies should be classified as securities and he has often been a vocal critic of the cryptocurrency industry. In particular he has noted the noncompliance of the industry, in his opinion.
The agency has filed a civil case against co-founder of FTX, Sam Bankman-Fried. They also filed lawsuits against Binance, its CEO at the time Changpeng Zhao, and Coinbase. All three entities have denied any wrongdoing and have requested the dismissal of the regulator’s cases.
In September of 2023 Gensler noted that while not all cryptocurrency tokens can be prejudged, there are a significant portion of them which fall under the securities laws. He also noted that many of them remain non-compliant. He noted:
“This crypto space that much of it, without prejudging any one token, much of it is under the securities laws, but unfortunately, much of it is also non-compliant.”
Gensler also noted that crypto has had a destructive impact on millions of investors who have suffered losses, while emphasising that these problems could also resonate beyond the crypto industry and impact the broader financial system.
Have a great day.
CryptoGod-1.
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