(AP Andrew Harnik, File) A federal judge in Utah dismissed a case against a cryptocurrency company after ruling attorneys for the SEC misled him early on.

| May 31, 2024, 12:00 p.m.

| Updated: 4:12 p.m.

A judge has dismissed the Securities and Exchange Commissions fraud case against crypto brokers based in Utah and ordered the agency to pay their attorneys fees, which hands the $1.8 million tab to taxpayers.

In March, Chief District Court Judge Robert J. Shelby had formally sanctioned SEC attorneys in the case for presenting misleading evidence during their bid to freeze the assets of DEBT Box.

Shelby on Tuesday dismissed the case, as the SEC had requested, without prejudice. That means the agency can try again to prosecute DEBT Box, but the judge added the condition that any future charges must be filed in his court.

The SEC declined to comment any part of the ruling, including whether attorneys would bring a new case. The dismissal, the government attorneys said in court documents, will allow them to regroup, conduct a proper investigation and decide on the appropriate next steps.

DEBT Box celebrated the ruling on X (formerly Twitter) and called it a monumental victory, not just for D.E.B.T. Box but for the entire industry and our dedicated community.

DEBT Box was once based in Draper and now operates overseas. Nearly 30 defendants associated with the company were charged, and the $1.8 million in defense fees will be split between eight attorneys offices.

My clients are relieved that its over, for now, said Richard Hong, lead attorney for DEBT Box, in a phone call Wednesday. We are gratified by the judges rulings and the full attorney fee awarding.

The SEC charged last July that DEBT Box and its associates had lied to investors about virtually every aspect of the business and pocketed millions in fraudulent earnings. Attorneys asked Shelby for a temporary restraining order and asset freeze, which he granted in August 2023.

Shelby later determined that some of the SECs key evidence was incorrect or misleading. He reversed the restraining order that fall and sanctioned the agency in an 80-page March ruling that called the SECs conduct a gross misuse of power.

Hongs office, New York-based Morrison Cohen LLP, is owed the most in fees around $565,500 and was granted the full amount it requested. Shelby ruled that a straight fee based on actual cost accrued, and not adjusted for local markets was an appropriate sanction for bad faith conduct on the part of Commission attorneys.

Defendants have already been the victim of this misconduct and they should not be revictimized by being required to establish the prevailing local rates for this type of litigation, Shelby wrote.

DEBT Box was co-founded by Utah brothers Jason R. Anderson and Jacob S. Anderson, according to court documents. Its associates and co-defendants include several executives from Utah and Utah-registered businesses. The company now conducts limited operations overseas, according to an attorney.

An earlier motion to dismiss from SEC attorneys said the agency would refile its case against DEBT Box, and argued there is still evidence that retail investors have been and are being harmed.

The most recent motion, which Shelby approved, said the SEC has replaced the entire legal and investigative team handling the case in the last few months, and argued a dismissal would allow the new team to reinvestigate and determine whether to refile.

The SEC wants to ensure that its allegations are fully supported by the record before proceeding with the litigation, the motion said.

Hong said his team and his clients will wait and see if the agency brings a new case against them. A new investigation will take time, and once it is done, it could take an additional eight weeks to present a recommendation to the commission if investigators decide another case is warranted, according to the agencys motion to dismiss.

Well see what happens next, Hong said. But if the SEC brings further action, we will be ready for it.

Shannon Sollitt is a Report for America corps member covering business accountability and sustainability for The Salt Lake Tribune. Your donation to match our RFA grant helps keep her writing stories like this one; please consider making a tax-deductible gift of any amount today by clicking here.

Continued here:

Cryptocurrency case against Utah DEBT Box dismissed, SEC ordered to pay attorney fees - Salt Lake Tribune