United States District Judge Robert Shelby has issued a stern warning to Securities and Exchange Commission (SEC) lawyers, hinting at possible sanctions in the legal action against Digital Licensing Inc., also known as DEBT Box, a cryptocurrency company accused of deceiving investors by around $50 million through the sale of unregistered securities known as “node licenses.”
Inconsistencies in the SEC’s case surfaced as Judge Shelby discovered inaccuracies in the initial claim that led to the freezing of DEBT Box’s assets.
Allegations of the company relocating to Dubai were proven false, with no bank account closures and an alleged overseas transfer of $720,000 revealed to be domestic.
Expressing concerns about SEC lawyers’ conduct, Judge Shelby suggested violations of federal court Rule 11(b), which mandates evidence-backed factual claims. In response, he issued a “show cause order,” demanding the SEC to justify why they should not face penalties for these actions.
The complexity of the case gains depth with a TRM Labs report supporting the SEC’s primary claim that DEBT Box deceived investors regarding mining tokens. The defense counsel is yet to provide a statement, and the SEC, acknowledging the order, plans to respond within the specified two-week timeframe.
This legal development underscores the intricacies of cryptocurrency regulation, emphasizing the importance of legal accountability in high-stakes financial litigation.
Ripple lawyer John E. Deaton, unswayed by the SEC’s alleged dishonesty, suggests personal biases in crypto cases and calls for a subpoena against the financial regulator. His colleague, Ripple chief technology officer Stuart Alderoty, highlights troubling patterns observed in the SEC’s conduct in cryptocurrency-related matters, raising questions about the agency’s credibility in such cases.