Five U.S. senators have expressed their concerns to the chairman of the U.S. Securities and Exchange Commission (SEC), Gary Gensler, regarding the agency’s enforcement action against crypto firm Debt Box. The court found that the SEC made “materially false and misleading representations.” The lawmakers stressed: “We are greatly concerned by the Commission’s conduct in this case.”
Senators Troubled by SEC’s Action in Debt Box Case
U.S. Senators Bill Hagerty, Cynthia Lummis, JD Vance, Thom Tillis, and Katie Boyd Britt wrote a letter to the chairman of the U.S. Securities and Exchange Commission (SEC), Gary Gensler, expressing concerns regarding the securities regulator’s enforcement proceedings against Digital Licensing Inc. (aka Debt Box), the company’s principals, and 13 other defendants.
The lawmakers began by highlighting that the SEC obtained “a temporary asset freeze, restraining order, and other emergency relief” against Debt Box through “materially false and misleading representations” in court. Noting that “The restraining order froze the defendants’ personal and business assets, shut down Debt Box, and caused its native token to crash by more than 56 percent,” they emphasized the significant harm it has inflicted on the company and its stakeholders.
When the court threatened to impose sanctions against the SEC for the misrepresentations made, SEC’s Enforcement Division Director, Gurbir Grewal, admitted the inaccuracies and pleaded with the court to reconsider the penalty, the letter details. The senators told Gensler:
We are greatly concerned by the Commission’s conduct in this case. 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 senators stated that the SEC’s “charitable explanation is unacceptable.” They find it “deeply troubling” that “the Commission counsel could be so unfamiliar with the relevant facts of the case, and that Commission attorneys could have such little regard for the veracity of evidence presented to the Court.”
In response to the court’s threat of sanctions, the SEC said that it would require staff to undergo “mandatory training … about the duty of accuracy and candor and the duty to correct any inaccuracies as soon as they come to light,” the letter describes. However, the lawmakers stressed:
We are skeptical that this response and the Commission’s pledge to reshuffle personnel is proportionate to the very serious allegations outlined by the Court.
“The public must have well-placed confidence in the Commission’s enforcement actions, its motives for undertaking them, and its professionalism when carrying them out. This trust is undermined, and your mission compromised, by episodes like the Debt Box case,” the letter warns. After attempting to convince the court against imposing sanctions, the SEC filed a request to dismiss its lawsuit against Debt Box.