The U.S. Securities and Exchange Commission (SEC) has said it plans to file a motion to dismiss a lawsuit against crypto firm Debt Box without prejudice after facing the possibility of sanctions for misleading the court. 

In a Jan. 30 court filing with a Utah District Court, lawyers for the SEC said it recognized that its attorneys should have been more forthcoming with the court, but believes that the statements do not warrant sanctions. 

Last year, the SEC accused Debt Box of orchestrating a $49 fraudulent scheme, alleging that the firm teamed up with iX Global, which it describes as a “multi-level market company,” to promote Debt Box’s crypto asset. In August, it won a restraining order to freeze Debt Box’s assets, claiming that the firm had sent $720,000 overseas to evade U.S. laws.

The Judge overseeing the case, Robert Shelby, later dissolved his initial order and concluded that the SEC’s lawyers had made several “false and misleading” statements, and had failed to back up their allegations. 

The Commission cited a YouTube video as evidence, where Debt Box founder Jacob Anderson said the company had “moved all operations to Abu Dhabi.” The court later found that the company had not closed its customer accounts, but the bank had done so instead, and Debt Box had moved funds from the closed accounts to an account based in the U.S.

Judge Shelby ordered the SEC to explain its statements in a “show cause order,” asking the regulator to argue why sanctions should not be imposed upon its lawyers. 

“The Commission takes very seriously the concerns expressed by the Court in the Order to Show Cause and has undertaken a process to provide the Court with a thorough response to the Court’s questions,” said the SEC in a Dec. 7 statement.

The SEC now seeks to dismiss the lawsuit entirely, but this doesn’t necessarily mean the agency will escape scot-free, Fox Business journalist Eleanor Terrett noted on X. 

“The judge could choose to impose monetary sanctions on the agency for misleading the court,” she said.