The US District Court for the District of Utah has dismissed the SEC’s case against DEBT Box without prejudice and imposed more than $1.8 million in fines against the watchdog for bad faith.
The penalties, which come in the form of attorneys’ fees and costs, follow sanctions against the SEC for misrepresentations made to obtain ex parte relief.
The court granted the SEC’s request to dismiss the current case without prejudice, allowing the agency to bring a future related case in the same court before the same judge.
DEBT Box and other defendants had argued that the case should be dismissed with prejudice to prevent the SEC from taking further enforcement action against the company. However, the company called the ruling a positive development.
DEBTS box added:
“This is an important victory for us. It means the SEC cannot continue with the case as it is now.”
The court declined to dismiss the case with prejudice because the litigation is still in its early stages, the defendants have not yet spent significant amounts of money in legal costs, and the SEC’s enforcement activities are in the public interest.
The court sanctioned SEC in March
The SEC initiated enforcement actions against DEBT Box in July 2023 over allegations of involvement in a $50 million fraud scheme. The regulator subsequently granted a temporary restraining order and asset freeze against the company.
Subsequent proceedings found that the SEC provided misleading information to the court in justifying its orders, including inaccurately describing the recency of account closures and confusing domestic transactions with international transactions.
In March, the court imposed sanctions on the SEC for its misconduct and ordered it to pay fines.
At the time, the court ruled that the SEC could not refile its case – a decision that successfully reversed the SEC’s request for unconditional dismissal.
