People exit the headquarters of the U.S. Securities and Exchange Commission (SEC) in Washington, D.C.
People exit the headquarters of the U.S. Securities and Exchange Commission (SEC) in Washington, D.C. Reuters

KEY POINTS

  • The Senate Banking Committee members said they were "greatly concerned" over the SEC's conduct
  • They said it was "unconscionable" that the regulator operated unprofessionally
  • The SEC has since moved to have its Debt Box lawsuit dismissed

Republican lawmakers with the Senate Banking Committee recently expressed "concerns" over the U.S. Securities and Exchange Commission's (SEC) handling of the regulator's case against crypto firm Digital Licensing, which goes by the business name Debt Box.

GOP senators with the committee, J.D. Vance of Ohio, Cynthia Lummis of Wyoming, Thom Tillis of North Carolina, Bill Hagerty of Tennessee, and Katie Boyd Britt of Alabama, said in a letter this week addressed to SEC chief Gary Gensler that the panel was "greatly concerned" by the regulator's conduct after the SEC's Enforcement Division director Grubir Grewal admitted to misrepresentation of evidence in the lawsuit filed against Debt Box.

"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 committee members wrote.

Republican senators raised concerns about the Securities and Exchange Commission's (SEC) response to U.S. District Judge Robert Shelby's rebuke, citing misstated information presented in court by SEC counsel.

In a December filing, the Commission admitted that its counsel "made a representation during the July 28, 2023 hearing that, unbeknownst to him at the time, was inaccurate." The SEC added that its attorneys "failed to correct that statement when they learned the inaccuracy."

The senators then argued that regardless of whether Commission personnel deliberately or unknowingly provided false information in court, the case against Debt Box "suggests other enforcement cases brought by the Commission may be deserving of scrutiny."

Finally, the senatorial group reminded the SEC of its "mission to protect investors" and maintain fair markets, noting that the public deems the Commission's enforcement actions of utmost importance. "This trust is undermined, and your mission compromised, by episodes like the Debt Box case," they warned.

The SEC sued Debt Box in mid-2023, accusing the blockchain tech project of scheming to sell unregistered securities. It said Debt Box illegally moved the assets and funds of investors overseas. It also obtained an initial asset freeze order for the cryptocurrency firm's bank accounts.

Judge Shelby raised doubts about the case in December, threatening to sanction the regulator over its alleged "misleading" court proceedings in the Debt Box lawsuit.

Earlier this month, the SEC moved to have the lawsuit junked, asking the court to "dismiss this action without prejudice." In its filing, the regulator argued that sanctions were unnecessary in addressing the issues Judge Shelby previously raised as it is currently reviewing allegations and evidence regarding the matter.

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