Debt Box counters SEC’s bid for dismissal, alleges strategic maneuver

Debt Box argued that the SEC’s move to dismiss is an attempt to receive special treatment in federal courts compared to entities it regulates.

Crypto project DEBT Box asked a Utah federal judge on Feb. 14 to deny the United States Securities and Exchange Commission (SEC)’s motion to dismiss the controversial enforcement action against it. 

In the filing, Debt Box characterized the SEC’s move as a strategic maneuver to evade possible sanctions and a permanent dismissal due to alleged misconduct.

The SEC submitted a motion to dismiss in January, expressing its intent to assess the evidence in the case and understand the factors that might have led its legal representatives to initially make inaccurate statements to the court.

However, the defendants from Debt Box argued that the SEC’s readiness to dismiss the case without prejudice is a strategic move to evade sanctions and possibly initiate a revised version of the enforcement action free from misconduct allegations. Digital Licensing Inc., which does business as Debt Box said:

“The SEC wants to exit this action under its own terms while retaining the option to re-file another enforcement action against the Debt Box defendants and other defendants at some undetermined time in the future, and perhaps in a different forum — as if nothing happened in this case, but something did happen in this case.”

Related: US senators call SEC actions in Debt Box case ‘unconscionable’

The defendants argued that the SEC’s move to dismiss is an attempt to receive special treatment in federal courts compared to entities it regulates. They pointed out the SEC’s dissatisfaction with promises to restructure teams or offer more ethics training when businesses are accused of misleading investors.

Debt Box’s response follows the SEC’s acknowledgment of making inaccurate statements in late December. Utah U.S. District Court Judge Robert Shelby criticized the SEC’s lawyers and directed the agency to clarify “false or misleading” statements, stating that the company sought to relocate assets overseas to evade regulatory jurisdiction.

However, Judge Robert overturned the measures, stating the SEC misrepresented the situation. In response to a court order, the regulator changed its legal representation, committed to internal training, and sought a temporary dismissal for an internal review.

Debt Box also requested that the scheduled hearing on March 7 proceed as planned despite the SEC’s request for cancellation.

In the early stages of the case against Debt Box and its promoters, the SEC secured emergency measures, alleging they defrauded investors of at least $49 million by selling unregistered securities in the form of licenses for software that claimed to mine digital assets linked to real-world industries.