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US court condemns SEC for "gross abuse" of authority in dispute with blockchain business

Signage is visible at the headquarters of the U.S. Securities and Exchange Commission (SEC) in Washington, D.C., U.S., May 12, 2021

March 19 (mod1s) - A U.S. federal court ruled the Securities and Exchange Commission (SEC) had engaged in "gross abuse of the power entrusted to it by Congress" in its dispute with blockchain technology startup Digital Licensing, which conducts business as DEBT Box. 

The regulator had sued the blockchain startup in July last year, accusing it of cheating investors, opening new tab of roughly $50 million. 

Chief District Judge Robert Shelby stated on Monday the SEC operated in "bad faith" and was "deliberately perpetuating falsehoods" in its attempts to secure an asset freeze and a temporary restraining order against the corporation.

The regulator, for instance, accused DEBT Box of seeking to shift its assets offshore. Citing a YouTube video from the firm, it said that DEBT Box was in the midst of transferring its activities to the United Arab Emirates to escape U.S. securities regulations. 

Lawyers for DEBT Box rejected the charges, stating the remarks made in the YouTube video were only highlighting the merits of operating in the UAE vs the uncertain regulatory climate in the U.S.

The court also sanctioned the SEC, directing it to pay lawyers' fees and legal expenses of DEBT Box. The judgment, however, "should not be construed as offering any views on the underlying merits of the case" against DEBT Box and was focused primarily on the regulator's misbehavior, the court noted. 

The SEC is frequently accused of taking a heavy-handed attitude towards crypto businesses, and its chief Gary Gensler is a staunch critic of the sector.

He has been attacked by CEOs in the crypto sphere for jurisdictional overreach, and some have warned that the unfriendly regulatory climate in the U.S. might lead to big industry participants leaving elsewhere. 

An SEC representative said the agency was examining the decision.


Source: https://www.reuters.com/

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