Just In: CIF Files FOIA Request on SEC, Gensler’s Handling of DebtBox Case

The Cedar Innovation Foundation (CIF), a non-profit organization that educates people about cryptocurrencies, has launched a Freedom of Information Act (FOIA) request for the detailed exchanges between the U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler and its Enforcement Director Gurbir Grewal in DEBT Box Case.

CIF Seeks Details on How SEC Officials Handled Debt Box Case

The need focuses on the latest scandal concerning the SEC accusation against the crypto company Debt Box and the resignation of two SEC lawyers. Transparency was stressed by the spokesperson of CIF, Josh Vlasto, who implied that these resignations could be hiding deeper problems within the organization.

NEW: Non-profit #crypto education group Cedar Innovation Foundation (@CIFonX) has just filed a FOIA (Freedom of Information Act) request for all communications between @SECGov Chair @GaryGensler and Enforcement Director @GurbirGrewalNJ regarding the sanctioning of the agency in…

— Eleanor Terrett (@EleanorTerrett) May 8, 2024

Background of the Debt Box Case

The controversy erupted when the SEC tried to obtain a temporary restraining order against Debt Box, a crypto company based in Utah. Nevertheless, the action by the SEC was widely condemned by the U. S. Chief District Judge Robert Shelby of the District of Utah.

In December, Judge Shelby raised the alarm over the SEC’s “materially false and misleading representations” presented during the proceedings, which he thought undermined the integrity of the legal process.

Although the SEC admitted to failing to meet their own standards, the court sided with the Debt Box, and an order was passed in March for the SEC to cover the company’s legal fees. This ruling was reinforced by legislators’ criticisms for more oversight of the SEC’s enforcement practices.

Resignation of SEC Attorneys

After the court verdict, two principal attorneys involved in the Debt Box case, Michael Welsh and Joseph Watkins, left the SEC. It is believed that both were given the option to resign or face getting sacked.

The conditions under which these resignations took place have brought up internal misconduct and accountability concerns within the SEC.

The response of the SEC consisted of apologies from the two attorneys and a personal apology from Gurbir Grewal, the Director of the Division of Enforcement of the SEC. However, following these apologies, Judge Shelby rejected the SEC’s motion to dismiss the case without prejudice, thereby signifying the necessity of more scrutiny of the case’s merits.

Legislative and Public Reactions

The judgment handling of the Debt Box case by the SEC has not only been judicial scrutiny but also has gained the attention of the legislators. An example of this sentiment was displayed during a congressional hearing that discussed the Debt Box case as an illustration of potential overreach and misconduct within the SEC.

Representative Ann Wagner, R-Mo. , in an earlier Coingape report, cautioned that if such problems were not properly resolved, confidence in the SEC would continue to drop. Consequently, the CIF’s FOIA request seeks to reveal the extent of the SEC leadership’s role in mishandling the Debt Box case. 

According to CIF spokesperson Josh Vlasto, the public should be informed of the complete range of the organization’s internal activities and deliberation process.

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