SEC Freezes Assets of DEBT Box in $50 Million Crypto Fraud Case
Jessie A Ellis Aug 03, 2023 16:08
The U.S. Securities and Exchange Commission (SEC) has obtained a temporary asset freeze, restraining order, and other emergency relief against Digital Licensing Inc., a Utah-based entity operating as "DEBT Box," along with its four principals and 13 other defendants.
The U.S. Securities and Exchange Commission (SEC) has obtained a temporary asset freeze, restraining order, and other emergency relief against Digital Licensing Inc., a Utah-based entity operating as "DEBT Box," along with its four principals and 13 other defendants. The action is in connection with an alleged fraudulent scheme involving the sale of crypto asset securities, as announced in a press release dated July 28, 2023.
According to the SEC's complaint, unsealed in the U.S. District Court for the District of Utah, the defendants have been engaged in an ongoing scheme since March 2021 to sell unregistered securities referred to as "node licenses." Through various online videos, social media posts, and investor events, DEBT Box and its principals claimed that these licenses would generate crypto asset tokens via crypto mining activity, and that revenue-generating businesses in different sectors would drive the value of the tokens, resulting in significant gains for investors.
The SEC alleges that the "node licenses" were a sham, created by DEBT Box instantaneously using code on a blockchain, and that the company and its principals lied about virtually every material aspect of their unregistered offering. The complaint states, "We allege that DEBT Box and its principals lied to investors about virtually every material aspect of their unregistered offering of securities, including by falsely stating that they were engaged in crypto asset mining," as per Tracy S. Combs, Director of the SEC’s Salt Lake Regional Office.
The fraudulent scheme reportedly raised approximately $50 million, along with unspecified amounts of Bitcoin and Ether. In total, 18 defendants have been charged with engaging in unregistered securities offerings, with additional charges for violations of the antifraud provisions of the federal securities laws against some of the defendants.
The Honorable Judge Robert J. Shelby, U.S. District Judge for the District of Utah, entered an order on July 28, 2023, imposing a temporary restraining order, asset freeze, and other relief. Josias N. Dewey of the law firm Holland & Knight LLP has been appointed as a temporary receiver over DEBT Box to marshal assets for the benefit of investors.
Investors who believe they were affected by the DEBT Box offering may seek further information at the receiver's website or by calling a designated phone number.
The SEC's action against DEBT Box highlights the regulatory body's continued focus on ensuring compliance within the crypto asset space and protecting investors from fraudulent schemes. The investigation is ongoing, and the SEC has provided educational resources to help investors recognize the risks associated with crypto asset securities and unregistered offerings.
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