Debt Box Urges Utah Federal Judge to Reject SEC’s Motion to Dismiss Enforcement Action

Hassan Shittu
Last updated: | 3 min read
Debt Box Urges Utah Federal Judge to Reject SEC's Motion to Dismiss Enforcement Action
Source: Dalle-3

Debt Box, a software firm entangled in a legal battle with the United States Securities and Exchange Commission (SEC), has launched a countermove against the regulatory body’s attempt to dismiss the case.

Filed on February 14, Debt Box’s response characterized the SEC’s motion as a strategic maneuver aimed at sidestepping potential sanctions and the permanent dismissal of the case due to alleged misconduct.

DEBT Box Challenges SEC’s Attempt to Dismiss Case, Alleging Double Standard

Debt Box vehemently opposed the SEC’s recent move to dismiss its case, despite the agency’s acknowledgment of inaccurate statements made in court last December.

The software firm, entangled in a legal battle with the SEC over an alleged fraud scheme, filed its rebuttal on Wednesday, decrying what it perceives as a double standard in the SEC’s approach to enforcement actions.

“The SEC wants a double standard—it wants to be treated differently before federal courts than those that it regulates or attempts to regulate,” Debt Box stated in its filing, highlighting what it sees as preferential treatment sought by the SEC in comparison to the stringent measures it imposes on others suspected of securities market malfeasance.

The software company’s resistance follows the SEC’s admission late last year that it had made inaccurate statements, prompting Utah U.S. District Court Judge Robert Shelby to criticize the agency’s legal representatives and demand clarification on the purportedly “false or misleading” statements.

The SEC initially alleged that DEBT Box attempted to relocate assets overseas to evade regulatory jurisdiction.

The legal battle between Debt Box and the SEC stems from allegations that the software firm defrauded investors of at least $50 million by selling unregistered securities in the guise of software licenses purportedly capable of mining digital assets tied to real-world industries.

The SEC had secured emergency measures in the early stages of the case, alleging that the company would clandestinely transfer assets overseas if notified of an impending freeze order. This led to the issuance of a temporary restraining order freezing Debt Box assets on August 3, 2023.

SEC’s Lawsuit Dismissal An Attempt to Avoid Sanctions

In response, the SEC initially submitted a motion to dismiss its case against Debt Box last month, indicating the possibility of refiling the case at a later time.

The agency cited an intention to reassess the evidence and investigate factors contributing to inaccurate statements made to the court by its legal representatives.

However, the software company contends that the SEC’s willingness to dismiss the case without prejudice is a calculated tactic to avoid sanctions and potentially reinitiate the enforcement action devoid of misconduct allegations. 

According to Debt Box, the SEC’s move appears to be an effort “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.”

To address its missteps, the regulatory body outlined corrective measures, including assigning senior attorneys from its Denver Regional Office to supervise the case moving forward. 

However, the filing by Debt Box highlights the allegation that the SEC seeks preferential treatment in federal courts over entities it regulates.

It points to the SEC’s purported dissatisfaction with promises of organizational restructuring or enhanced ethics training when businesses face accusations of misleading investors.

Debt Box reiterated this in its filing:

“Apologies from an individual or entity do little to mitigate. Promises to ‘re-staff’ a team or to provide additional ethics training do not lead the SEC to just walk away from a case. Undoubtedly, the SEC does not permit any defendants a ‘do-over’ to fix their wrongdoings, consequence-free.”

Debt Box further pressed for the continuation of the scheduled hearing on March 7, despite the SEC’s request for its abandonment.