According to a court filing, a federal judge warned attorneys of the Securities and Exchange Commission (SEC) on Thursday that they could face sanctions if they purportedly persuaded a court to freeze the assets of a cryptocurrency firm using “false and misleading” arguments.
U.S. District Judge Robert Shelby of the U.S. District Court in Utah has ordered that the SEC’s attorneys may face sanctions for allegedly presenting “misleading” arguments regarding the cryptocurrency project Debt Box’s purported endeavors to transfer its investors’ funds and assets abroad.
This reportedly caused a court to freeze the bank accounts associated with the project. Judge Shelby stated in an order that the SEC’s “misrepresentations… undermined the integrity of the case’s proceedings” and caused “irreparable damage” to Debt Box.
As defined by the legal dictionary on Law.com, sanctions are penalties imposed by a court on individuals who sign statements they are aware of to be false or who otherwise contravene court procedures.
Civil law sanctions are commonly enforced in the form of monetary penalties, as stated on Law.com.
In August, a federal magistrate issued a temporary restraining order against Debt Box, limiting the organization’s access to its assets.
Debt Box’s attorneys stated in a filing that he subsequently revoked the order when the company proved it had not transferred funds outside the United States and had not closed its bank accounts two days before a hearing regarding the SEC’s request to sequester its funds.
The Utah branch of the SEC failed to respond to a request for comment at the earliest.
Debt Box was initially sued by the SEC in July on charges that it devised a scheme to sell “node licenses,” which are unregistered securities, starting in 2021.
The SEC initially charged that Debt Box misled investors into believing that the licenses would be used to mine cryptocurrency, which would be appreciated.
However, the company allegedly printed the cryptocurrency using computer code.
Judge Shelby requested in his order dated Thursday that the SEC’s attorneys respond to his conclusions that their arguments, which claimed Debt Box had attempted to transfer its funds overseas, were devoid of context and unfounded.
The ruling stipulates that the regulator has a period of two weeks to respond to the inquiry.