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The US Securities and Exchange Commission (SEC) has been sanctioned over its disputed restraining order against the crypto firm DEBT Box, according to a March 18 court filing.

As a result of the SEC’s misconduct, the court has mandated the commission to cover the legal fees, costs, and expenses incurred by Debt Box. This decision serves as a stern rebuke to the regulatory body and reinforces the importance of adherence to legal and ethical standards.

DEBT Box and the receivers must file petitions for fees within 30 days, meaning that the amount of money to be paid by the SEC is still unknown.

Some commentators are concerned that those payments will be drawn from taxpayer money. Coinbase CLO Paul Grewal suggested that the sanctions will be paid by “every US taxpayer,” adding that the SEC “foisted a bill onto every one of us for their litigation misconduct.”

SEC can’t refile case

The current filing also denies the SEC’s earlier motion to dismiss the case without prejudice, which would have allowed it to end the current proceedings and refile the case.

Despite the SEC’s interest in abandoning proceedings, the latest development does not conclude the case. The court must still determine whether the SEC was justified in pursuing the controversial restraining order by examining the regulator’s statements.

Judge Robert Shelby nevertheless condemned the SEC’s handling of the case, writing:

“The [SEC’s conduct] constitutes a gross abuse of the power entrusted to it by Congress and substantially undermined the integrity of these proceedings and the judicial process.”

The controversy emerged when the SEC initiated a temporary restraining order (TRO) and asset freeze against Debt Box, alleging involvement in a fraudulent $50 million crypto scheme.

However, it was later revealed that the SEC had provided the court with misleading information, including false allegations about a $720,000 transaction purported to be an international transfer, which was, in fact, an internal transaction within the US.

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