The SEC Versus DEBT Box: The Case Takes a New Twist
DEBT Box has made a request to have the lawsuit filed against it and other defendants by the Securities and Exchange Commission (SEC) dismissed following revelations that the SEC lied to obtain a temporary restraining order against them. “The SEC got this case wrong. Badly wrong,” lawyers for Digital Licensing Inc., which does business as DEBT Box, reported to Utah federal court Judge Robert Shelby in their motion to dismiss on Dec. 4.
DEBT Box alleges, “The SEC should not be allowed to continue to spin a false narrative to avoid dismissal.” The SEC secured a temporary restraining order to freeze assets belonging to DEBT Box on Aug. 3. The regulator claimed that the firm would destroy evidence and clandestinely move assets overseas if they learned about the order against them. Allegedly, the firm had been involved in a $50 million fraudulent cryptocurrency operation.
Crypto Software Mining Licenses in Question
DEBT Box sold software mining licenses which were connected to tangible assets. The SEC declared these to be unregistered securities. DEBT Box, however, strongly refuted these allegations. “Not only are such allegations false, but they also fail to meet the basic pleading standards,” it stated in its recent motion.
SEC Misrepresentation Claims
A Utah federal court reversed the asset freeze on Nov. 30, concluding that the SEC had misrepresented evidence. The agency had previously claimed that DEBT Box had closed bank accounts with the intention of migrating to the United Arab Emirates to evade SEC jurisdiction. The court discovered the firm did not in fact close any bank accounts, and what the SEC claimed to be a $720,000 overseas transfer was actually domestic.
Moreover, DEBT Box insists that the SEC “misrepresents the state of law regarding crypto assets” in its “fatally flawed pleading.” The misrepresentation by the SEC led to a “show cause order” by Judge Shelby, which requires the regulator to specify reasons why they shouldn’t face penalties for their actions.
SEC’s “Shocking” Behavior Deserves Punishment
The SEC’s actions were described as “shocking” by Ripple’s chief technology officer, David Schwartz. “The SEC went to a judge seeking an emergency order to paralyze several businesses and blatantly misrepresented facts to get it before anyone on the other side could defend themselves,” he expressed in a Dec. 5 Twitter post.
John Deaton, a lawyer in favor of Ripple, expressed hope that the regulator would be required to compensate DEBT Box for the harm it had caused. “The Debt Box case is a great example of why Judge Netburn felt compelled to announce to the world that lawyers at the SEC “lack a faithful allegiance to the law” and do or say anything to advance its own agenda,” Deaton stated on Twitter.
DEBT Box: Case Principals In The Spotlight
In addition to Jason Anderson, Jacob Anderson, Schad Brannon, and Roydon Nelson — the four principals of DEBT Box — the SEC’s lawsuit also included 13 other individuals.