Debt Box Counters SEC’s Bid, Alleges Strategic Maneuver

Software company Debt Box is opposing a motion by the US Securities and Exchange Commission (SEC) to dismiss a controversial enforcement action against it. Debt Box claims that the SEC’s attempt to dismiss the case without prejudice is a calculated move to avoid sanctions and potentially bring a revised version of the enforcement action free from allegations of misconduct. The company argues that the SEC is seeking preferential treatment in federal courts over the entities it regulates. This comes after the SEC admitted to making inaccurate statements to the court in December 2023, prompting criticism from Judge Robert Shelby. In response, the SEC changed its legal representation, promised internal training, and sought a temporary dismissal for an internal review.

Debt Box is also calling for the scheduled hearing on March 7 to proceed as planned, despite the SEC’s request for its cancellation. In the early stages of the case, the SEC obtained emergency measures against Debt Box, alleging that the software company defrauded investors of at least $50 million by selling unregistered securities in the form of software licenses. The SEC was granted a temporary restraining order to freeze Debt Box’s assets in August 2023, citing concerns that the company would attempt to remove evidence and transfer assets overseas secretly.

Debt Box accuses the SEC of trying to escape potential sanctions and avoid a permanent dismissal by seeking to dismiss the case without prejudice. By doing so, the SEC retains the option to re-file the enforcement action against Debt Box and other defendants in the future. The company emphasizes the SEC’s dissatisfaction with mere promises to restructure teams or provide additional ethics training to businesses accused of misleading investors.

The recent filing from Debt Box comes after Judge Robert Shelby criticized the SEC’s lawyers for misleading the court and ordered the agency to clarify any false or misleading statements regarding the relocation of assets overseas to evade regulatory jurisdiction. Shelby found that it was the SEC itself that misrepresented the situation. In response to the court order, the SEC made changes to its legal representation, committed to internal training, and sought a temporary dismissal for a thorough internal review.

Debt Box is challenging the SEC’s attempt to dismiss the case and highlighting its concerns over the SEC’s perceived desire for preferential treatment. The company believes that the SEC wants to exit the action on its own terms while reserving the option to initiate a new enforcement action free from allegations of misconduct. Despite the SEC’s request for cancellation, Debt Box is requesting that the scheduled hearing on March 7 proceed as planned. The SEC had initially obtained emergency measures against Debt Box, alleging that the company defrauded investors by selling unregistered securities in the form of software licenses. The SEC’s temporary restraining order froze Debt Box’s assets, citing concerns over potential evidence tampering and asset transfers.