On Monday, U.S. District Judge Robert Shelby levied sanctions against the Securities and Exchange Commission (SEC) in response to accusations of serious misconduct in the legal action against Utah-based cryptocurrency firm DEBT Box.

The decision comes after the judge determined that the SEC had committed a gross abuse of power in its handling of the case.

SEC Slammed with Sanctions

The case got widespread attention after the defendants accused the SEC of misrepresenting key facts to obtain a temporary restraining order freezing assets on the crypto platform.

U.S. District Judge Robert Shelby ordered the SEC to explain its actions after lawyers for DEBT Box raised concerns about the agencys conduct. Subsequently, the agency admitted to errors but urged the judge not to issue formal punishment.

However, in Mondays decision, Judge Shelby rejected the SEC’s request and highlighted multiple instances of “bad faith” conduct. He held the agency accountable for its actions, stating that it had “substantially undermined the integrity of these proceedings and the judicial process.”

For the reasons explained below, the court imposes sanctions against the Commission for bad faith conduct in obtaining, maintaining, and defending the TRO, and denies the Commission’s Motion to Dismiss without prejudice to refile in accordance with the District of Utah’s Local…

Shelbys 80-page filing imposed sanctions on the SEC, requiring the agency to cover DEBT Boxs attorneys’ fees and costs related to the restraining order. The judge rejected the regulators motion to dismiss the lawsuit without prejudice, which would have allowed the agency to refile the lawsuit at a later date.

DEBT Box faced legal action from the SEC in July for allegedly defrauding investors of nearly $50 million through the sale of unregistered securities.

The watchdogs move included a request for an ex parte temporary restraining order, typically reserved for cases where theres a risk of evidence destruction or flight from the country. This was after the SEC claimed DEBT Box was closing bank accounts and planning to leave the U.S.

Judge Shelby Questions SECs Integrity

Initially granting the SECs request, Judge Shelby later questioned the agencys information accuracy, prompting a call for evidence. In December, the regulator admitted errors, with enforcement chief Gurbir Grewal apologizing for the oversight.

However, the agency sought to avoid sanctions, arguing against bad faith conduct. In January, the SEC moved to dismiss the case, maintaining sanctions werent appropriate.

Im sorry, so sorry

How long must you punish me?

Why cant we just move on?

Let bygones be bygones

But you never will

Whats the difference

If this time Im the one that did the wrong?

Should it matter?

Dolly Parton, Bygones. And the SEC in its sur-reply in Debt Box. pic.twitter.com/eS6ZStxp2A

In his ruling, Judge Shelby criticized the SECs reliance on its federal agency status to justify its actions, particularly in seeking the restraining order. Shelby expressed concern that granting the initial order disrupted lives. He also noted that the SEC not only reiterated factual inaccuracies but introduced new falsehoods in subsequent representations to the court.

Shelby emphasized that these issues couldnt be dismissed as mere unintentional errors. He concluded that the SECs legal team made deliberate strategic choices to present false information, knowing it would not be able to secure the restraining order and asset freeze otherwise.