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.


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 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.

Industry City | 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.

Brooklyn, NY

SUN - MON, JUN. 22 - 23, 2025

Blockworks and Cracked Labs are teaming up for the third installment of the Permissionless Hackathon, happening June 22–23, 2025 in Brooklyn, NY. This is a 36-hour IRL builder sprint where developers, designers, and creatives ship real projects solving real problems across […]

recent research

Research Report Templates.png

Research

We believe DoubleZero, given its symbiotic relationship with validators & searchers, promise to boost overall network efficiency and throughput, lack of competition, and ability to serve many blockchain ecosystems, will command meaningful pricing power and could command a meaningful take of priority revenues across blockchains.

article-image

A new policy framework says decentralization should be judged by control — not vibes

article-image

You know about the Bitcoin Standard — what about the Bitcoin Scholarship?

article-image

Toku’s suit accuses an ex-employee of stealing confidential business information and sharing it with competitor Liquifi

article-image

Partial recovery is already in motion, according to the Loopscale team

article-image

Microsoft, Meta, Amazon and Apple are slated to report Q1 earnings this week, and we’re watching one especially closely

article-image

Tariff concerns on corporate earnings and weakening of the US dollar contributed to the surge, CoinShares exec says