The Securities and Exchange Commission (SEC) has decided to withdraw its lawsuit against cryptocurrency startup DEBT Box after it admitted to making inaccurate statements in court.
The agency filed a lawsuit against Digital Licensing Inc., which does business as DEBT Box, in July of last year.
However, it has now informed U.S. District Court Judge Robert Shelby of its intention to dismiss the case without prejudice, allowing the SEC to refile it at a later date if necessary.
“The Commission has determined that the best course of action is to dismiss this action without prejudice,” SEC lawyers said in a filing Tuesday.
“Thus, the Commission has authorized the filing of a motion to dismiss this action without prejudice, which will be forthcoming.”
The SEC made inaccurate statements about the debt fund
The SEC admitted in late December that it had made inaccurate statements and acknowledged that it had not met expectations of accuracy and candor in court.
Before that, Judge Shelby criticized the agency’s lawyers and demanded an explanation for “false or misleading” statements made by the SEC, alleging that DEBT Box was trying to move assets offshore to evade regulatory oversight.
The SEC also opposed imposing sanctions on its attorneys, as Judge Shelby ordered.
The agency stated that although it acknowledged that its lawyers should have been more forthcoming with the court, it believed that sanctions were unnecessary to address this issue.
The SEC’s lawsuit against cryptocurrency startup DEBT Box alleged that the company defrauded thousands of investors out of at least $49 million. The fraud allegedly occurred through “node licenses” that allowed owners to earn income from mining 11 tokens that were not actually mined.
While the case will be dismissed for now, the SEC reserves the option to review the matter in the future.
The SEC continues to regulate by enforcing the law
Over the past year, the SEC has filed numerous lawsuits against cryptocurrency companies, with SEC Chairman Gary Gensler consistently stating that most cryptocurrencies should be classified as securities.
On the one hand, the agency filed a civil suit against Sam Bankman-Fried, co-founder of FTX.
In addition to the case against Bankman Fried, the SEC has filed lawsuits against other major players in the cryptocurrency space, including Binance, its CEO Changpeng Zhao, and Coinbase.
The three entities denied any wrongdoing and demanded that the regulatory body’s cases be dismissed.
Meanwhile, Gensler has been an outspoken critic of cryptocurrencies recently, warning of the cryptocurrency industry’s lack of compliance.
In September last year, he acknowledged that while not all tokens could be prejudged, a significant portion of the cryptocurrency industry was subject to but still not compliant with securities laws.
“A large portion of this cryptocurrency space, without prejudice to any token, is subject to securities laws, but unfortunately, a lot of it is also non-compliant,” he said.
He stated that cryptocurrencies had a devastating impact on millions of investors who suffered losses, and stressed that these problems could extend beyond the cryptocurrency industry and affect the broader financial system.