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SEC ordered to pay $1.8 mil. to defendants for misrepresentations

Courts Securities Exchange Commission Attorney Fees

Courts

On May 28, the U.S. District Court for the District of Utah ordered the SEC to cover all attorney fees and related costs as part of sanctions imposed following the court’s earlier emergency ex parte relief it entered into “improvidently.” The SEC originally filed a complaint against the defendants for allegedly violating federal securities law. Concurrently, the SEC sought a temporary restraining order (TRO), a freeze on assets, and appointed a receiver, all of which were granted by the court.

However, in September 2023, the defendants filed a motion to dissolve the TRO and argued the SEC made misrepresentations to the court. The following month, the court agreed with the defendants, dissolving the TRO and receivership. The SEC moved to dismiss the case without prejudice in January. In March, the court imposed sanctions against the SEC for “bad faith conduct” regarding the TRO. Additionally, in a separate dismissal order, the court issued an order to dismiss the case without prejudice.

Siding with the defendants, the court determined the proper method for calculating costs was straight fee recovery, allowing the defendants to submit their specific legal fees rather than using a lodestar method. The court granted most defendants’ fee petitions and the receiver’s application for fees and costs, ordering the SEC to pay over $1.8 million.