The Securities and Exchange Commission’s action against Debt Box has ended, as a federal court yesterday (Tuesday) dismissed the case without prejudice. The court further ordered the regulator to pay the company a total of $1.75 million.
According to the court order, the American regulator must pay $1 million to Digital Licensing, doing business as Debt Box, to cover its attorney fees and another $750,000 for its receiver fees and costs.
Meanwhile, prop trading firm My Forex Funds is also seeking a sanctions order against the Commodity Futures Trading Commission (CFTC).
Sanctions against the SEC
In an earlier order in March, the court acknowledged the SEC's inappropriate actions against Debt Box. The court even highlighted that the regulatory actions were in “bad faith” and a “gross abuse of power.”
The SEC sued Debt Box last year, alleging fraud, and obtained a temporary asset freeze and restraining order against the company. The regulator alleged that the crypto company was selling cryptocurrency mining licenses but was actually creating tokens with an algorithm.
To obtain the temporary restraining order, the regulator claimed that the crypto company had already sent $720,000 overseas and would flee to the United Arab Emirates. It also raised concerns about the secret transfer of funds overseas if it was notified of the order. Although the court initially approved the order sought by the SEC, the judge later concluded that the regulator misrepresented the evidence. Further, the $720,000 transfer was made within the United States, not overseas.
CFTC Is Also Fighting against Sanctions
The decision in the SEC's case against Debt Box might also impact another case: the CFTC's actions against My Forex Funds.
Last August, the CFTC sued the two entities operating the My Forex Funds brand and their CEO, Murtaza Kazmi, alleging fraud. The regulator even obtained a temporary restraining order, freezing the companies' assets and Kazmi's personal assets.
However, the defence lawyers argued that the regulator obtained the temporary restraining order by mischaracterising tax payments, leading to the unfreezing of most of Kazmi's assets. Later, legal representatives of My Forex Funds found that the regulator knowingly mischaracterised the nature of the tax payment and also lied in court.
Now, My Forex Funds is seeking a sanctions order against the CFTC. In its argument, the prop trading platform cited the court order against the SEC in the Debt Box case, in which the regulator was sanctioned. As the court has dismissed the case, it might strengthen the prop trading firm's arguments in the upcoming evidentiary hearing against the CFTC for sanctions.
