SEC Pleads for Leniency in Debt Box Case After Admitting Errors

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  • The SEC has requested that the judge overseeing its case against Debt Box be restrained in imposing sanctions against it
  • Judge Robert Shelby has threatened to impose sanctions on the SEC over an improper asset freeze
  • The SEC has asked that no sanctions other than dismissal without prejudice be filed against it

The US Securities and Exchange Commission (SEC) has asked the court overseeing its claim against Debt Box to issue no sanctions other than the dismissal of the case after the judge threatened the agency with sanctions. In December, the judge overseeing the case criticized the SEC for potentially making “false and misleading representations” after freezing the assets of crypto firm Digital Licensing Inc., owner of Debt Box. As a result, the SEC has asked that the judge not impose a financial penalty, but merely dismiss the case in a manner that will allow it to re-file.

Improper Asset Freeze Hit Hard

Last year the SEC accused Digital Licensing Inc. of defrauding investors of nearly $50 million through its company Debt Box product, which led to it obtaining a temporary restraining order and seizing the company’s assets without notifying it, alleging that its operators were planning to move operations to Abu Dhabi. However, the court found the SEC’s claims to be false, leaving the SEC facing embarrassment and, worse, sanctions.

In its defense, the SEC admitted making a mistake and pledged to avoid such errors in the future, requesting the judge to accept its motion to dismiss the action without prejudice as the only penalty.

SEC Wants Leave to Re-file

Lawyers representing Debt Box had requested sanctions against the SEC, seeking to drop the case entirely, citing significant personal and financial damages resulting from the court-granted restraining order. DEBT Box defendants, known as the “DEBT Council,” claimed that the SEC’s actions affected 300,000 users in over 130 countries, crashing the native token by over 56%. They also detailed frozen assets, canceled loans, and refusals from banks and credit card companies, all as a result of the improper action.

Debt Box wants the case dismissed with prejudice, which would mean that the SEC cannot re-file on the same grounds, whereas the SEC naturally wants Judge Robert Shelby to “decline to impose a penalty beyond dismissal without prejudice.”