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  • Writer's pictureMichael Bacina

SEC to cut check for USD$1.8M to Debt Box

The US Securities and Exchanges Commission (SEC) was recently sanctioned in a crypto enforcement matter, and has now been formally punished, being ordered to pay US$1.8M in legal and receivership fees.

In July 2023, the SEC obtained a freezing order against Digital Licensing (trading as Debt Box), and simultaneously sued the business, claiming that it was operating an illegal US$50M crypto scheme.

The SEC was successful in appointing a receiver over Debt Box's business at the time, effectively shutting down the business. The native token of Debt Box crashed by over 50 percent following the action.

However, Debt Box has continued to fight back, throwing a particularly devastating hook in leading evidence that the SEC had misled and lied to the Court when obtaining the initial injunction. That evidence led to the injunction and receivership ending in October 2023 and the SEC being asked to show cause why the SEC should not be sanctioned for their conduct. In March of 2024, the SEC was formally sanctioned for what the Court called:

acting in bad faith

and a

gross abuse of power

in obtaining the initial injunction. The SEC team acting on the case resigned after this decision and 6 Republican Senators wrote a letter to Gary Gensler, Chair of the SEC, calling the behaviour "unconscionable".

In the most recent decision, the SEC has been granted a motion dismissing the case without prejudice meaning that it can relitigate the matter. However, Debt Box was successful in obtaining a number of conditions which the SEC agreed to follow if the case is to be relitigated, including that the case must be refiled in the same court, presumably so the same Judge can oversee the matter.

The US$1.8M order includes $750,000 for receivership costs and $1M for legal costs, but nothing in damage for the business impact of the improperly gained restraining order, showing the very real outcomes for a Government agency which misleads the Courts, but that the damage from such actions leaves a continuing mark. There is no word at present as to whether the SEC will seek to relitigate the matter, as it remains under review.

By Michael Bacina


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