US Senators Call Out SEC’s Chairman For “Misleading Representations” In Crypto Case

Following the recent dismissal of the case against crypto firm Digital Licensing by the US Securities and Exchange Commission (SEC), a group of US Senators have sent a letter to the agency’s chair, Gary Gensler, expressing concerns about the handling of the case.

SEC’s “Unethical” Proceedings In Crypto Case

On February 7, five republican US senators signed a letter addressed to US SEC Chairman Gary Gensler. The group, consisting of US senators J.D. Vance, Bill Hagerty, Katie Boyd Britt, Thom Tillis, and Cynthia Lummis, voiced their worry regarding the agency’s “enforcement proceedings” during the case against the crypto firm operating under the name ‘DEBT Box.’

In the letter, the US Senators highlighted some of the SEC’s “questionable” proceedings, including a temporary freeze of the firm and the company principals’ assets. The District Court granted the “emergency relief” measures for the District of Utah before the court became aware that “the Commission made materially false and misleading representations… and undermined the integrity of the proceedings.”

The senators consider that the SEC had operated in “an unethical and unprofessional manner” while handling the case against the crypto firm and determine that such performance “is unconscionable” from any federal agency:

It is unconscionable that any federal agency—especially one regularly involved in highly consequential legal procedures and one that, under your leadership, has often pursued its regulatory mission through enforcement actions rather than rulemakings—could operate in such an unethical and unprofessional manner.

The letter also criticizes the commission’s comment about its failure to correct the inaccurate information presented by the SEC attorneys after becoming aware of it, affirming that the statement suggests negligence, which is an “unacceptable” and “deeply troubling” explanation from the agency.

Lastly, The senators closed their letter suggesting that handling the DEBT Box case brings scrutiny to similar cases conducted by the SEC, damages the public’s confidence in the commission, and puts into question the agency’s mission to protect investors. The document added:

This case suggests other enforcement cases brought by the Commission may be deserving of scrutiny. It is difficult to maintain confidence that other cases are not predicated upon dubious evidence, obfuscations, or outright misrepresentations.

DEBT Box Case Overview

Last year, the SEC sought legal action against DEBT Box for alleged involvement in a fraudulent crypto scheme. According to the agency, the scheme involved the $50 million sale of unregistered crypto asset securities to US investors.

The US regulator obtained a temporary asset freeze for the crypto firm and personal assets from the defendants, who included the company’s principals –Jason Anderson, Jacob Anderson, Schad Brannon, and Roydon Nelson­– and 13 others.

Consequentially, the actions taken by the US agency caused the temporary shutdown of DEBT Box and the crash of its native token DEBT by more than 56%, as the letter stated.

NEW: The @SECGov has just filed a brief in the @DebtBox case saying that it intends to dismiss the lawsuit against the company.

The SEC is choosing dismissal rather than face possible sanctions from the judge for misleading the court in order to secure a restraining order and… pic.twitter.com/ByxkG6prV4

— Eleanor Terrett (@EleanorTerrett) January 30, 2024

After District Judge Robert J. Shelby reviewed the case, the SEC faced the possibility of sanctions due to the inaccurate statements. The revelation of the agency’s “misleading” handling of the case led the SEC to dismiss the case on January 30, 2024.

The US SEC admitted that “its attorneys should have been more forthcoming with the Court” but ultimately reserved the opportunity to file a new suit against the crypto firm by dismissing the case “without prejudice.”