SEC admits it made inaccurate statements in Utah crypto case

The Securities and Exchange Commission admitted it made inaccurate statements in a lawsuit against crypto startup DEBT Box, but the regulator insisted that the firm's assets should still be frozen.

In November, Utah's top federal judge criticized SEC lawyers over their handing of the case, demanding they provide a basis for their request for a restraining order on DEBT Box to freeze its assets. 

Judge Robert J. Shelby ordered the SEC to explain "false or misleading" statements after it claimed the company was trying to move assets overseas in order to escape the regulator's jurisdiction.

In a response to the court on Thursday, the SEC admitted misstating some of its accusations to support its request for the restraining order, such as that DEBT Box was allegedly closing dozens of its accounts during the ongoing litigation.

The SEC "fell short" of the expectations to be accurate and candid in the court, made representations that were inaccurate, failed to correct themselves and "make clear that certain representations were inferences from the facts… rather than directly supported factual assertions," it said in the response.

'Good faith'

However, the agency insisted it had acted in good faith and rightfully requested the restraining order.

The SEC said it took measures to correct its mistakes, assigning senior attorneys from the Commission’s Denver Regional Office to supervise the case going forward. The SEC's Division of Enforcement will also conduct mandatory training for its staff  "about the duty of accuracy and candor and the duty to correct any inaccuracies as soon as they come to light."

The lawsuit alleges that DEBT Box defrauded thousands of investors for a total of $49 million. DEBT Box offered customers so-called "node licenses" to receive revenue from mining without running an actual mining operation. 

According to the SEC, DEBT Box falsely stated they had a real-world business. The regulator said DEBT Box was trying to move assets overseas in order to escape the regulator's jurisdiction and obstruct the SEC investigation. 

The commission obtained the restraining order earlier this year but it was dissolved in October after the court confirmed the SEC failed to sufficiently back its claims.