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SEC to close Salt Lake office after ‘serious abuse of power’ in Utah cryptocurrency case
SALT LAKE CITY – The U.S. Securities and Exchange Commission announced Tuesday that it will close its Salt Lake office by the end of the year. The news comes just a week after commission prosecutors’ misconduct led to the dismissal of a civil fraud case against Utah cryptocurrency brokers and the award of $1.8 million in legal fees.
“Businesses have been seized, assets have been frozen and lives have been upended” because of misconduct by SEC prosecutors, a federal judge said in dismissing a civil fraud case against Utah cryptocurrency brokers and awarding brokers $1.8 million in legal fees.
Chief U.S. District Judge Robert Shelby rebuked the commission, saying they recklessly used “layers of false statements” in a “gross abuse of power,” their false statements were “deeply troubling” and undermined the integrity of the judicial process, before closing the case. May 28 and will order the payment of taxes that will ultimately be funded by taxpayers.
The commission’s press release did not mention the case, instead attributing the closure to “significant attrition” recently experienced.
“The agency considered its budget and organizational efficiency in deciding to close the office,” the SEC said. “All current personnel will be aligned with the SEC’s existing organizational components based on their current duties and the needs of the agency’s mission.”
In July 2023, Debt Box, a cryptocurrency broker previously operating out of Draper, and North Salt Lake financial technology firm iX Global, along with a number of other associated parties, were reported by the SEC by alleging “an ongoing, extensive, and fraudulent securities offering through which the defendants defrauded thousands of investors of at least $49 million,” according to the initial complaint.
Rather than use investor money to support the business, the SEC said “defendants misappropriated the funds for their own personal gain, purchasing luxury vehicles and homes, taking lavish vacations, and showering themselves and their friends of cash”.
Critically, the commission told Shelby that entrepreneurs were rapidly closing their U.S. bank accounts and moving investor funds overseas “to put them out of the reach of the court.”
The SEC requested a short-term emergency order to freeze the assets of the companies in question and effectively take over their management during the proceedings.
The request is a form of extraordinary relief, Shelby said in an opinion, because at that stage of the trial, the court was working only with “unproven allegations” and must take extreme care not to abuse the judicial process.
In oral arguments, prosecutors said the companies closed 33 bank accounts in the past 48 hours. It said the companies had drained bank accounts and were moving money overseas to avoid SEC oversight.
The judge granted the motion to freeze the assets and take over the companies, but two months later found that “any support” offered by the commission in its requests “proved to be a combination of falsehood, mischaracterization and misleading.”
To make matters worse, after the prosecution was put on notice for its false statements, “it nevertheless asserted those positions and did so in a manner that demonstrated an attempt to obfuscate and continue to mislead the court rather than acknowledge the ‘mistake,’ according to court documents.
Shelby wrote that a total of 24 accounts were closed, not the suggested 33, over a two-year period. The defendants did not close these accounts: the bank did. And the funds were not transferred overseas, they were transferred to a bank based in Sandy.
The judge said these claims were “reckless at best. This was not simply an inaccuracy.”
No other accounts were found to have been drained, but were simply floating in the course of normal business. According to the judge, a YouTube video used as key evidence was taken out of context to mislead the court. The inferences were presented as factual, despite having no direct evidence to support them.
Part of the error was attributed to miscommunication, and the SEC said it “sincerely regrets the error” it made when it chose not to notify the court when staff members learned that the statements made were “inaccurate under multiple wait.”
The judge did not find the argument convincing and surmised that the prosecution “explicitly used its special position as a federal agency – reminding the court that it had been granted this relief several times over the past 10 years – to demonstrate that could have been trusted when asking for this tremendous exercise of judicial authority.”
The prosecution then claimed that it had “sovereign immunity” from any monetary fines – an argument Shelby promptly rejected.
Debt Box celebrated the win, posting on social media about the firing that it was “a monumental victory, not only for Debt Box but for the entire industry and our dedicated community.” Many reacted to the news as if the ruling cleared the company of any wrongdoing, but the jubilee may be short-lived.
Shelby wrote that “the order should not be construed as offering opinions on the merits of the case,” and although the lawsuit was dismissed as is, the SEC is able to dismiss his fraud allegations as long as do it. chaired by Shelby.
The SEC did not immediately respond to a request for comment.