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SEC cracks down on Utah-based DEBT Box in crypto fraud scheme, freezing $50 million in assets

SEC cracks down on Utah-based DEBT Box in crypto fraud scheme, freezing $50 million in assets

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TL;DR

  • The SEC has obtained a freeze on assets of Utah-based DEBT Box for alleged fraudulent crypto sales, raising $50 million.
  • DEBT Box reportedly misled investors about “node licenses” to generate crypto tokens, creating them instantaneously with blockchain coding instead.
  • Eighteen defendants are charged, and the SEC is seeking permanent injunctive relief, return of gains, and civil penalties, highlighting concerns over unregistered crypto securities.

On Thursday, the Securities and Exchange Commission (SEC) launched an emergency legal intervention against Digital Licensing Inc., conducting business as “DEBT Box,” alongside its four principals and 13 additional defendants. This move is in response to the discovery of an alleged fraudulent scheme that sold unregistered crypto asset securities named “node licenses” to hundreds of U.S. investors, amounting to roughly $50 million.

According to the SEC’s unsealed complaint filed in the U.S. District Court for the District of Utah, the ongoing scheme began in March 2021. The defendants made claims through hundreds of online videos and social media posts that these node licenses would generate various crypto tokens through mining activities. They also promised that revenue-generating businesses across multiple sectors would increase the value of the tokens mined by DEBT Box, resulting in significant profits for investors. However, the SEC alleges that the node licenses were a mere façade, masking the fact that DEBT Box instantly created the total supply of each token through coding on a blockchain.

The SEC’s intervention includes a temporary asset freeze, restraining order, and other emergency relief measures. The Director of the SEC’s Salt Lake Regional Office, Tracy S. Combs, stated, “We filed this emergency action to protect the victims of the defendants’ unlawful actions and stop further harm.”

Charges, allegations, and legal proceedings against DEBT Box and co-defendants

The complaint targets a total of 18 defendants, accusing them of participating in unregistered securities offerings. Furthermore, DEBT Box and specific individuals within the company are charged with violating the anti-fraud provisions of the federal securities laws. Some of the individuals were also charged with acting as unregistered brokers.

The defendants are also accused of deceiving investors about the revenues of the businesses, supposedly driving the value of the tokens. The SEC is seeking permanent injunctive relief, the return of alleged ill-gotten gains, and civil penalties.

U.S. District Judge Robert J. Shelby entered an order on July 28, 2023, implementing the temporary restraining order, asset freeze, and additional relief measures. A temporary receiver has been appointed over DEBT Box to marshal assets for the benefit of investors. Affected investors are encouraged to visit the receiver’s website or call the provided contact number.

The SEC’s continuing investigation is handled by members of the Salt Lake Regional Office and SEC Headquarters. Additionally, the litigation will be managed by attorneys Casey Fronk and Michael Welsh, under the supervision of Ms. Combs.

On July 31, the SEC  charged an individual, Richard Heart, with the misappropriation of investor funds through unregistered securities. Heart, using the entities Hex, PulseChain, and PulseX, allegedly raised $1 billion by promoting Hex tokens as a high-yield investment, promising up to 38% returns. The SEC claims that Heart did not register these securities and used $12 million of the investment for personal luxuries, including a world-renowned black diamond.

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.

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Damilola Lawrence

Damilola is a crypto enthusiast, content writer, and journalist. When he is not writing, he spends most of his time reading and keeping tabs on exciting projects in the blockchain space. He also studies the ramifications of Web3 and blockchain development to have a stake in the future economy.

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