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SEC moves to drop DEBT Box case, for now, after sanctions threats – Crypto News
After the threat of court sanctions, the Securities and Exchange Commission has decided to drop charges — at least for now — against Digital Licensing Inc., which operates under the name DEBT Box.
In November, Federal Judge Robert Shelby ordered SEC attorneys to explain why they shouldn’t be sanctioned by the court after presenting what he regarded as false and misleading evidence in their attempt to bring a temporary restraining order (TRO) against DEBT Box and other defendants. The SEC was granted a TRO in August 2023 following the evidence presentation.
In a brief filed Tuesday, the SEC said that it made a mistake and will work to ensure these errors do not happen again. The securities regulator asked the judge to accept a motion to dismiss the action without prejudice, which “will be forthcoming,” as the only penalty against the SEC.
Read more: Gensler’s SEC brought 46 crypto-related enforcements in 2023
“While the Commission recognizes that its attorneys should have been more forthcoming with the Court, sanctions are not appropriate or necessary to address those issues,” the SEC wrote in the Tuesday filing. “If the Court were to determine that some sanction is warranted, it should decline to impose a penalty beyond dismissal without prejudice.”
Dismissal without prejudice leaves the door open for the SEC to refile charges against the defendants down the line.
The SEC, Shelby alleged in the Nov. 30 order, deceived the court by incorrectly stating that the defendants had closed bank accounts and attempted to move funds overseas. The comments were enough to grant, and later renew, a ten-day TRO, which froze the defendants’ assets.
“Commission counsel made a representation during the July 28, 2023 hearing that, unbeknownst to him at the time, was inaccurate,” the SEC wrote in a December filing responding to Shelby’s claims. “Commission attorneys failed to correct that statement when they learned of the inaccuracy.”
The filing comes roughly two weeks after attorneys for DEBT Box asked the court to sanction the SEC for its wrongdoing and drop the case entirely, citing substantial personal and financial damages that resulted from the court-granted restraining order.
Defendants say the TRO shut down the crypto firm, resulting in a “complete disruption” for around 300,000 users in more than 130 countries. DEBT Box’s native token crashed more than 56%, defendants added.
Defendants Jason Anderson, Jacob Anderson, Schad Brannon and Roydon Nelson, known as the “DEBT Council” and sole controllers of the platform, according to the SEC, had personal and business assets frozen by the restraining order. The individuals were unable to pay employees, loans were canceled and credit card companies and banks refused to work with them as a result, defendants said in a Jan. 12 filing.
The SEC, in its Tuesday filing, said any additional sanctions including dismissal with prejudice, would be too extreme a punishment. The agency said it “is continuing to take steps to address the issues the Court identified and to identify any other issues that may warrant further consideration.”
“Experienced trial attorneys” from the SEC’s Denver Regional Office have also stepped in, the SEC said, to review Shelby’s allegations.
Richard Hong, partner at Morrison Cohen and representing DEBT Box, declined to comment.
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