February 22, 2024

Debt Box urges judge to toss suit, says SEC got case ‘badly wrong’

Debt Box and other defendants in a United States Securities and Exchange Commission (SEC) lawsuit want the case tossed after a court found the agency lied to secure a temporary restraining order against them.

“The SEC got this case wrong. Badly wrong,” lawyers for Digital Licensing, which does business as Debt Box, told Judge Robert Shelby of the U.S. District Court for the District of Utah in a Dec. 4 motion to dismiss. “The SEC should not be allowed to continue to spin a false narrative to avoid dismissal.”

The SEC won a temporary restraining order to freeze Debt Box assets on Aug. 3, claiming the firm would remove evidence and secretly transfer assets overseas if they were notified the order would be imposed on them.

The agency accused the firm of perpetrating a $50 million fraudulent crypto scheme. Debt Box sold software mining licenses tied to real-world assets, which the SEC claimed were unregistered securities. The defendants refute this claim.

“Not only are such allegations false, but they also fail to meet the basic pleading standards,” it wrote in its latest motion.

A Utah federal court reversed the asset freeze on Nov. 30, saying the SEC misrepresented evidence by claiming Debt Box closed bank accounts and intended to move to the United Arab Emirates and escape the SEC’s jurisdiction.

The court found the firm didn’t close the bank accounts, and a $720,000 transfer the SEC alleged was sent overseas was sent domestically.

Excerpt from Debt Box’s motion to dismiss. Source: CourtListener

The SEC “misrepresents the state of law regarding crypto assets” in its “fatally flawed pleading,” DEBT Box said.

The SEC’s misrepresentation resulted in the issuance of a “show cause order” by Shelby, mandating the regulator to provide reasons why it should not incur penalties for its actions.

SEC’s “shocking” behavior deserves punishment, says Ripple executives

Ripple’s chief technology officer, David Schwartz, said the SEC’s behavior is “shocking.”

“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 said in a Dec. 5 X (formerly Twitter) post.

Related: ‘We had to change strategies,’ says SEC enforcement director on recent actions: Report

Pro-Ripple lawyer John Deaton hopes the regulator will be forced to pay up for the damage done to Debt Box.

Debt Box’s four principals — Jason Anderson, his brother Jacob Anderson, Schad Brannon, Roydon Nelson and 13 others — were included in the SEC’s action.

Magazine: Crypto regulation: Does SEC Chair Gary Gensler have the final say?