SEC moves to drop DEBT Box case, for now, after sanctions threats

The SEC told the court that, while it made a mistake, dismissing these charges should be the only sanctions they face

article-image

Mark Van Scyoc/Shutterstock modified by Blockworks

share

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.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter.

Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Javits Center North | 445 11th Ave

Tues - Thurs, March 18 - 20, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

recent research

Unlocked Advisory-min.png

Research

This report distills Blockworks Advisory’s research on incentive programs and their analysis, offering a foundation for designing future initiatives and advancing industry-wide standards. By highlighting key lessons and methodologies, we aim to empower protocols to make informed, data-driven decisions.

article-image

The company did about 2.5 times the amount of crypto-backed collateral financing in November compared to the rest of 2024, exec says

article-image

Programmable yield, seamless swaps and decentralized control are the hallmarks of a new stablecoin model

article-image

Crypto is “really exciting,” former SEC Commissioner Paul Atkins said in a podcast interview last year

article-image

Bitcoin is now the “seventh most valuable asset in the world by market cap, just behind the likes of Google and Amazon,” GSR’s Brian Rudick said

article-image

Many analysts expected bitcoin to top $100K before year-end, though it’s been on a post-election tear

article-image

Will investors take a 10% lower return to get access to a regulated investment wrapper?