Coinbase’s Chief Legal Officer (CLO), Paul Grewal, has publicly denounced the U.S. Securities and Exchange Commission (SEC) for its unethical and unprofessional behavior in the recent DEBT Box case.
The case involved the SEC’s false allegations and asset freeze against Digital Licensing Inc., also known as DEBT Box, a company that provides digital licensing solutions using blockchain technology.
The SEC admitted that it deceived the court by misstating facts and evidence in its request for a temporary restraining order (TRO) against DEBT Box, which resulted in a freeze on the company’s assets. The SEC’s lawyers failed to correct their misrepresentations, even after they were aware of them, and did not inform the court or the defendants of their errors.
The SEC’s admission came after U.S. District Judge Robert Shelby questioned the agency’s conduct and ordered it to explain why it should not be sanctioned for its actions. Judge Shelby also expressed his dismay at the SEC’s lack of candor and professionalism, saying that he had never seen anything like this in his 25 years of practice.
Coinbase, one of the leading crypto exchanges in the world, was among the entities that received the SEC’s order to freeze assets related to DEBT Box. However, Coinbase challenged the SEC’s authority and demanded an explanation for its actions.
In a recent thread on X, a social media platform for crypto enthusiasts, Grewal revealed that Coinbase knew that the TRO against DEBT Box was “tainted by SEC’s misinterpretations.” He added, “But rather than immediately pulling its order after admitting that it deceived the Court, the SEC sat silently.”
Grewal further stated, “So rather than continue this injustice, we then told the SEC we wouldn’t comply further unless they explained why we should.” According to Grewal, Coinbase corrected the wrong by unfreezing the assets while the SEC remained silent.
Grewal’s criticism of the SEC was echoed by a group of Republican senators, including J.D. Vance and Cynthia Lummis, who wrote a letter to SEC Chair Gary Gensler, expressing their deep concerns about the commission’s enforcement practices. The senators accused the SEC of abusing its power and harming innocent parties, saying,
“It is unconscionable that any federal agency could operate in such an unethical and unprofessional manner.”
The SEC, facing mounting pressure, announced that it would take broader corrective actions to prevent similar incidents in the future. The agency said that it would dismiss the case against DEBT Box without prejudice and that it would provide additional training and guidance to its staff on the proper use of evidence and court procedures.
However, Grewal was not satisfied with the SEC’s response, calling it “hardly a sufficient remedy” for the damage done to DEBT Box and its customers. He urged the SEC to be more transparent and accountable and to respect the rule of law and the rights of crypto innovators.
