Coinbase CLO Slams SEC Amid Shutdown Of Office Involved In DEBT Box Lawsuit

The United States Securities and Exchange Commission (SEC) will close one of its eleven regional offices after a federal judge ordered the regulator to pay roughly $1.8 million in attorney and receivership fees. As the recent news spread, several crypto industry stakeholders reacted, including Coinbase’s Chief Legal Officer Paul Grewal. He slammed the agency as the Salt Lake office shutdown plans were announced.

In a June 4 notice, the SEC announced it would shut down its Salt Lake Regional Office in 2024. This closure is attributed to significant attrition at the office, and operations will be shifted to Denver. This decision follows Judge Robert Shelby’s dismissal of the SEC’s civil lawsuit against Digital Licensing, operating as DEBT Box, and an order requiring the SEC to pay substantial fees.

DEBT Box Lawsuit Prompts SEC Office Closure

Judge Shelby dismissed the SEC’s lawsuit against DEBT Box, which alleged the firm perpetrated an illegal $50 million crypto scheme. In March, the judge found the SEC had engaged in bad faith conduct over a temporary restraining order to freeze DEBT Box’s assets. Consequently, the judge ordered sanctions against the SEC, requiring the regulator to cover all attorney fees and costs arising from the improvidently entered ex parte relief.

The order mandated the SEC to pay approximately $1 million for attorney fees and costs and $750,000 for receiver fees and expenses. This financial penalty has significantly influenced the decision to close the Salt Lake Regional Office. The office’s responsibilities will be transferred to the SEC’s Denver office, ensuring ongoing regulatory work continues without interruption.

The SEC’s Salt Lake Regional Office has experienced significant attrition, contributing to its closure. Two SEC lawyers from this office resigned, reportedly due to the handling of the DEBT Box case. Their departure may have influenced the attrition that the SEC cited in its decision to shut down the office.

The commission has not commented on whether these resignations directly impacted the decision. However, the timing suggests a possible correlation. The closure announcement has raised questions about the SEC’s internal challenges, especially in managing high-profile cases involving cryptocurrency firms.

Terraform Labs Reaches Settlement with Agency

This development comes as the SEC pursues enforcement actions against several cryptocurrency firms, including Coinbase, Binance, Kraken, and Ripple (XRP). The agency’s aggressive stance on crypto regulation has led to numerous legal battles, some of which have ended unfavorably for the SEC.

In May, lawyers for Terraform Labs and its co-founder Do Kwon announced they had reached an in-principle settlement with the SEC. These legal engagements highlight the SEC’s ongoing efforts to regulate the crypto market despite facing setbacks such as the DEBT Box case.

Paul Grewal, Coinbase’s chief legal officer, commented on the SEC’s actions in a June 4 X post, suggesting the term “attrition” might downplay the significance of the SEC’s conduct in the DEBT Box case. The SEC’s approach to crypto regulation remains a contentious issue within the industry.

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