SEC Shuts Office After Legal Defeat in DEBT Box Case

SEC Shuts Down Regional Office After DEBT Box Case Loss.

The U.S. Securities and Exchange Commission (SEC) is closing one of its regional offices following a costly legal defeat. The regulator was ordered to pay nearly $1.8 million in attorney and receivership fees associated with a dismissed lawsuit against cryptocurrency firm DEBT Box.

In a June 4th announcement, the SEC revealed the closure of its Salt Lake Regional Office. Citing “significant attrition” at the office, the commission plans to shift its operations to Denver. This closure comes just one week after a federal judge dismissed the SEC’s civil lawsuit against DEBT Box, a company doing business under the name Digital Licensing.

Judge Robert Shelby dismissed the lawsuit and further ordered the SEC to reimburse DEBT Box for legal costs. This sum totals roughly $1 million for attorney fees and an additional $750,000 for receiver fees.

SEC Accused of Misconduct

The SEC filed its lawsuit against DEBT Box in July 2023, alleging the company ran a $50 million illegal crypto scheme. However, the tide turned in March 2024 when Judge Shelby found the SEC engaged in “bad faith conduct.” This accusation stemmed from the SEC’s use of a temporary restraining order to freeze DEBT Box’s assets, which the judge deemed improper. As a consequence, the SEC was sanctioned and required to cover all legal expenses incurred by DEBT Box due to the “improvidently entered” order.

Two SEC lawyers from the Salt Lake Regional Office reportedly resigned following the DEBT Box case controversy. While the specific cause for their departure remains unclear, it potentially contributed to the “significant attrition” cited by the SEC as a reason for closure.

DEBT Box Responds

DEBT Box chief marketing officer Miguel Francis-Santiago sees the closure as a direct response to the SEC’s “gross misuse of power” in their case. He further emphasized that any future SEC action against DEBT Box must be brought before Judge Shelby to prevent repetition of misconduct.

Despite this setback, the SEC continues its enforcement activities against several other cryptocurrency companies, including industry giants like Coinbase, Binance, Kraken, and Ripple. Additionally, May 2024 saw Terraform Labs and its co-founder Do Kwon reportedly reach an in-principle settlement with the SEC regarding their ongoing case.