The US Securities and Exchange Commission (SEC) has managed to make an inaccurate statement in an ongoing crypto fraud case after being questioned by a judge.
In July, the regulator obtained a temporary asset freeze, restraining order and other emergency relief against Digital Licensing Inc., a Utah-based company doing business as “DEBT Box.”
The SEC alleges that the company and its founders carried out a fraudulent scheme by selling fake “node licenses” to investors that the company promised would generate crypto assets through mining. The company reportedly raised around $50 million and unspecified amounts of Bitcoin (BTC) and Ethereum (ETH).
The SEC obtained the temporary restraining order (TRO) and asset freeze in part by alleging that DEBT Box and its founders funneled investor funds into luxury purchases and accounts abroad.
However, the defendants filed a motion to vacate the temporary restraining order granted by the court, alleging that the SEC misrepresented the facts in its allegations.
The restraining order was lifted at a hearing in October, and in November the judge on the case asked the SEC to explain the alleged misrepresentation.
In a response filed Thursday, the SEC acknowledged that one of its attorneys “made a statement” that was inaccurate during the first hearing on the restraining order in July.
Michael Welsh, the SEC’s lead attorney, alleged during the hearing that the defendants had closed approximately 33 bank accounts in the 48 hours leading up to the trial.
However, the regulator now acknowledges that Welsh’s number was derived from a miscommunication. In reality, the SEC explains, only 24 bank accounts were closed, and none were closed in the month of the hearing.
However, the SEC notes that the balances of several bank accounts of certain defendants were significantly reduced in July but not closed. The regulator also recognizes several cases in which interpretations and inferences have been wrongly presented as facts.
The SEC says it takes the judge’s concerns seriously and “deeply regrets” the errors. The regulator also notes that it is taking steps to prevent recurrence of these errors.
“In addition to other actions, the Enforcement Director has appointed senior attorneys from the Commission’s Denver Regional Office to oversee this matter going forward and has appointed an experienced trial attorney from the Denver Regional Office to lead the litigation team. The Enforcement Division will also provide mandatory training for all Department personnel involved in investigations and legal proceedings on the duty of accuracy and candor and the duty to correct any inaccuracies as they come to light.”
However, the SEC argues that the errors were not serious enough to warrant sanctions.
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