A US district court has warned the US Securities and Exchange Commission (SEC) about inaccuracies in the charges against crypto firm Debt Box. The SEC will face sanctions if it fails to substantiate its claims.

District Judge Robert Shelby asked US SEC lawyers to clarify inconsistencies in the department’s lawsuit against the crypto company Debt Box. In August 2023, the SEC obtained an order to temporarily freeze the company’s assets and obtained an injunction. The regulator alleged that Debt Box violated securities laws by selling “software mining licenses” and defrauding investors of $50 million.

SEC attorney Michael Welsh told the court that the Debt Box team attempted to move assets and investor funds overseas while evading U.S. authorities. Just days before the hearing on the company’s temporary injunction, the SEC learned that a significant portion of the funds held in bank accounts controlled by Debt Box had been withdrawn. The defendants closed about 33 accounts in the last 48 hours, Welsh said.

Debt Box’s defense presented documents in court showing that these 33 accounts were closed by the bank, not the defendant. Debt Box’s lawyers said the company had begun moving ahead with plans to move to the United Arab Emirates a year before the regulator sued it. And $720,000 in funds withdrawn from closed accounts were transferred to Mountain America Credit Union rather than overseas.

Given the significant discrepancies between the SEC’s allegations and the defendants’ arguments, the court issued an order requiring the Commission to provide more convincing evidence within 14 days. Failure to provide information would mean that the SEC provided the court with misleading information, after which sanctions would follow against the agency, Robert Shelby warned.

Earlier, US Republican Congressman Warren Davidson proposed removing Gary Gensler from the post of SEC Chairman due to unfounded refusals to launch Bitcoin exchange-traded funds.