SEC to shut down Salt Lake City Office
SALT LAKE CITY, Wednesday, June 10, 2024 – A federal judge on June 5 dismissed a civil fraud case against Utah cryptocurrency brokers Debt Box and ordered the U.S. Securities and Exchange Commission (SEC) to pay $1.8 million in attorney fees, citing “deeply troubling” misconduct by the agency.1
Chief District Judge Robert Shelby sharply criticized the SEC, accusing them of using “layers of false statements” in a “gross abuse of power” to obtain a freeze on the defendants’ assets.
He stated that the SEC’s misrepresentations undermined the integrity of the court and dismissed the case on May 28th. The fees awarded will ultimately be borne by taxpayers.
The SEC had sued Debt Box, a Draper-based cryptocurrency broker, and iX Global, a North Salt Lake financial technology company, along with others, in July 2023. The complaint alleged a “fraudulent securities offering” that defrauded investors of at least $49 million.
The SEC further claimed the defendants misappropriated investor funds for personal gain. Additionally, they alleged the companies were moving money overseas to avoid oversight. Based on these claims, the SEC sought a temporary order to freeze the defendants’ assets and take control of their operations.
Judge Shelby granted the freeze but later determined that “each piece of support” provided by the SEC “proved to be some combination of false, mischaracterized and misleading.” This included misrepresenting the number of closed bank accounts and the movement of funds.
The judge found that the SEC continued these misleading tactics even after being notified of inaccuracies. He rejected their claim of “sincere regret” and highlighted their attempt to leverage their past record for obtaining such freezes.
Debt Box celebrated the dismissal on social media, calling it a victory for the industry. However, Judge Shelby clarified that the order doesn’t address the underlying merits of the case.
The SEC can refile its fraud claims, but the case will remain under his jurisdiction.
The SEC initially filed a civil complaint in July 2023, accusing DEBT Box of running a fraudulent $50 million cryptocurrency operation.
However, the case unraveled when a federal judge, Robert Shelby, dismissed the lawsuit and sanctioned the SEC for “bad faith conduct” in its attempt to freeze DEBT Box’s assets. Judge Shelby further ordered the SEC to reimburse DEBT Box for legal fees incurred during the case.
Meanwhile, SEC announced in a press release that it would shut down Salt Lake City Office after the failed lawsuit.2
It said its Salt Lake City office (SLRO) would be closed later this year reducing the agency’s regional presence from 11 offices to 10.
The statement said:
“The Securities and Exchange Commission today announced that it will close its Salt Lake Regional Office (SLRO) later this year, reducing its regional footprint from 11 regional offices to 10.
The SLRO has long been the SEC’s smallest regional office and recently has experienced significant attrition. The agency considered its budget and organizational efficiency in deciding to close the office, and it has no plans to close any other regional offices. All current staff will be aligned to existing SEC organizational components based on their current functions and agency mission needs.
The SLRO’s enforcement jurisdiction over the state of Utah will be shifted to the SEC’s Denver Regional Office. The SEC’s National Exam Program previously shifted SLRO’s local jurisdiction to Denver many years ago; thus, regional examinations authority will be unaffected by the closure of the office.”
- ksl.com: https://www.ksl.com/article/51030326/judge-forces-sec-to-drop-utah-crypto-case-pay-18m-fees-due-to-deeply-troubling-misconduct[↩]
- sec.gov: https://www.sec.gov/news/press-release/2024-67?ref=tftc.io[↩]
