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US Judge Sanctions Gary Gensler’s SEC for Abuse in Crypto Case

2 mins
Updated by Harsh Notariya
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In Brief

  • US Judge Robert Shelby sanctioned SEC for misconduct in DEBT Box crypto case, highlighting abuse of power.
  • SEC accused of misrepresenting facts, leading to financial penalties and covering DEBT Box's legal costs.
  • Case emphasizes tensions in crypto regulation under SEC Chair Gary Gensler, impacting broader industry.
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The US District Judge Robert Shelby sanctioned the Securities and Exchange Commission (SEC) for misconduct in a lawsuit against DEBT Box, a Utah-based crypto firm.

This ruling, delivered on Monday, marks a significant moment in the ongoing clash between regulatory bodies and the crypto industry. It highlights the tensions under SEC Chair Gary Gensler’s tenure.

How SEC Misused Its Power in the Crypto Case

The case began when the SEC accused DEBT Box of defrauding investors through the sale of unregistered securities, leading to an asset freeze. Judge Shelby’s sanctions against the SEC followed revelations of misrepresented facts by the agency, which he termed a “gross abuse of power.”

Shelby’s 80-page filing imposed financial penalties on the SEC and criticized its handling of the legal process. He emphasized that the SEC’s conduct had greatly compromised the judicial system’s integrity.

Consequently, the agency was ordered to pay DEBT Box’s legal costs, showcasing the serious nature of the missteps.

DEBT Box, relatively unknown in the crypto ecosystem, was suddenly in the legal spotlight after the SEC’s allegations. The SEC’s initial steps included an ex parte restraining order, executed without prior notification to DEBT Box, based on now-contested claims of the firm’s evasion attempts.

As the case unraveled, the SEC’s narrative faced scrutiny. Despite an apology from enforcement chief Gurbir Grewal for the agency’s errors, Judge Shelby rejected the plea to avoid sanctions. He pointed out that the SEC’s misleading actions were not just oversights but deliberate attempts to sway the legal outcome.

“Given the myriad and repeated instances of misconduct, the court cannot write these issues off as non-willful, inadvertent mistakes,” Judge Shelby wrote.

The implications of this case extend beyond DEBT Box, affecting the broader crypto industry and its relationship with regulators. The case has stirred considerable attention, particularly for its implications on the broader crypto sector, which has often criticized the SEC’s aggressive regulatory posture under Gensler’s leadership.

Read more: Who Is Gary Gensler? Everything To Know About the SEC Chairman

Breakdown of SEC Crypto Enforcements by Alleged Violations.
Breakdown of SEC Crypto Enforcements by Alleged Violations. Source: Cornerstone Research

The legal skirmish between Coinbase and the SEC parallels this case, with Coinbase challenging the SEC’s regulatory clarity. The exchange has urged for defined rulemaking concerning digital assets, criticizing the SEC’s inconsistent stance as a barrier to compliance and innovation.

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Harsh Notariya
Harsh Notariya is a journalist at BeInCrypto, who writes about various topics, including decentralized physical infrastructure networks (DePIN), tokenization, crypto airdrops, decentralized finance (DeFi), meme coins, and altcoins. Before joining BeInCrypto, he was a community consultant at Totality Corp, specializing in the metaverse and non-fungible tokens (NFTs). Additionally, Harsh was a blockchain content writer and researcher at Financial Funda, where he created educational reports on...