The United States Securities and Exchange Commission (SEC) is making another move in its efforts to have its case against cryptocurrency mining software firm Digital Licensing, operating as Debt Box, dismissed. The agency has filed a reply to its motion for the court to dismiss the case without prejudice, which would allow the SEC to sue Debt Box again.
The U.S. District Court for Utah Northern Division previously sanctioned the SEC for “gross abuse of power” and dismissed its initial attempt to have the case dismissed without prejudice. Additionally, the court ordered Debt Box to be reimbursed for its legal fees. However, Debt Box has requested that the court does not dismiss the case without prejudice, labeling it as a maneuver to avoid permanent dismissal.
The SEC has argued that granting a dismissal without prejudice would be in the best interests of Debt Box investors, citing precedent that shows the court “normally should grant” a plaintiff’s request for dismissal without prejudice. The SEC’s lead attorneys in the case have resigned following the court’s sanctions.
If the dismissal is granted without prejudice, Debt Box has proposed 11 conditions for the SEC to follow if it chooses to refile the case. The SEC has agreed, either wholly or partially, to most of these conditions. One condition includes the use of a Wells notice, which is a warning from the SEC indicating its intention to bring charges, as well as the completion of investigation files. However, the SEC seeks to limit the material it would provide with the notice.
Debt Box has also requested that the SEC provide all material it subpoenaed in the case and have a representative present during non-subpoenaed interviews in the investigation. The SEC opposes this condition, as well as another condition requiring the production of potentially exculpatory information from its investigation, which would be favorable to the defendant.
Debt Box is accused of defrauding investors of $50 million by selling unregistered securities in the form of licenses to use their software for mining digital assets. In August, the SEC temporarily froze the company’s assets, a decision that resulted in the agency being sanctioned by the court for using a “false narrative” regarding the company’s plans to relocate outside the U.S. The SEC has expressed regret over this action.
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