Temporary Restraining Order Obtained by SEC
In an effort to halt DEBT Box’s activities, the SEC managed to obtain a temporary restraining order (TRO) and asset freeze. The commission argues that the company and its founders were using investor funds to make luxury purchases and transfer money to overseas accounts.
Motion to Dissolve Restraining Order Filed by Defendants
However, the defendants in the case filed a motion to dissolve the temporary restraining order, claiming that the SEC had misrepresented facts in its allegations. Subsequently, the restraining order was dissolved during a hearing in October, and in November, the judge in the case requested an explanation from the SEC regarding the alleged misrepresentations.
SEC Acknowledges Inaccuracy in July Hearing
In response to the judge’s request, the SEC filed a response on Thursday admitting that one of its lawyers had made an inaccurate representation during the initial July restraining order hearing. The SEC’s lead trial counsel claimed that the defendants had closed approximately 33 bank accounts in the 48 hours leading up to the court date. However, the SEC now acknowledges that this number was derived from a miscommunication. In reality, only 24 bank accounts were closed, and none were closed in the month of the hearing.
Although the SEC does note that the balances of several bank accounts owned by certain defendants were substantially decreased in July, it clarifies that these accounts were not closed.
Seriousness of Errors Argued by the SEC
The SEC acknowledges the judge’s concerns and expresses deep regret for the errors made. As a result, the Enforcement Director has appointed senior attorneys from the Commission’s Denver Regional Office to supervise the matter moving forward. Additionally, an experienced trial attorney from the Denver Regional Office will lead the litigation team. However, the SEC argues that the mistakes were not significant enough to warrant sanctions.
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