The SEC has secured temporary asset freezing, restraining orders, and other emergency measures against Digital Licensing Inc., operating under the name “DEBT Box,” a Draper, Utah-based entity. The action also involves the company’s four principals: Jason Anderson, Jacob Anderson, Schad Brannon, and Roydon Nelson, along with 13 other defendants. This legal action comes in response to a fraudulent scheme orchestrated by the defendants, which involved the sale of crypto asset securities to hundreds of U.S. investors, resulting in an approximate fundraising of $50 million, in addition to unspecified amounts of Bitcoin and Ether.
The SEC’s Allegations
The SEC’s complaint, filed in the U.S. District Court for the District of Utah, alleges an ongoing scheme initiated in March 2021, where the defendants promoted unregistered securities they referred to as “node licenses.” Through hundreds of online videos, social media posts, and investor events, the defendants claimed that these node licenses would yield various crypto asset tokens via crypto mining activities. They further asserted that these tokens’ value would skyrocket due to revenue-generating businesses in various sectors, promising investors substantial gains. However, as alleged, the node licenses were deceptive, concealing the fact that DEBT Box instantaneously generated the entire supply of each token using blockchain code.
The SEC’s Statement
Tracy S. Combs, Director of the SEC’s Salt Lake Regional Office, commented on the case, stating, “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. We filed this emergency action to protect the victims of the defendants’ unlawful actions and stop further harm.”
The SEC’s complaint also asserts that DEBT Box, its principals, and additional defendants, including James Franklin, Western Oil Exploration Company Inc., and Ryan Bowen, misled DEBT Box investors regarding the revenues of businesses supposedly underpinning the tokens’ value.
In total, 18 defendants, including those mentioned above, face charges related to engaging in unregistered securities offerings. Specific defendants, including Jason Anderson, Jacob Anderson, Brannon, Nelson, Bowen, Mark Schuler, Benjamin Daniels, Joseph Martinez, Travis Flaherty, Brendon Stangis, Matthew Fritzsche, B & B Investment Group, LLC, and iX Global, LLC, are also charged with acting as unregistered brokers.
Legal Action and Relief
The SEC’s legal action seeks permanent injunctive relief, the recovery of alleged ill-gotten gains, and civil penalties. An order entered by the Honorable Judge Robert J. Shelby, U.S. District Judge for the District of Utah, on July 28, 2023, has already imposed a temporary restraining order, asset freeze, and other relief measures. Judge Shelby also appointed Josias N. Dewey from the law firm Holland & Knight LLP as a temporary receiver for DEBT Box, with the responsibility to manage assets for the benefit of investors affected by the scheme. Investors who believe they were impacted by the DEBT Box offering can find more information on the receiver’s website at www.debtboxreceiver.com or contact (305) 349-2134.
For investors interested in understanding the risks associated with investing in crypto asset securities and unregistered offerings, the SEC offers valuable insights in investor education bulletins such as “Exercise Caution with Crypto Asset Securities” and “10 Red Flags That An Unregistered Offering May Be A Scam.”
Have a securities law question? Call New York Securities Lawyers at 212-509-6544.