Leaders of a Utah company that sold millions of dollars in crypto assets lied to hundreds of investors about what they were doing and pocketed the fraudulent earnings, the U.S. Securities and Exchange Commission alleges.
Digital Licensing, Inc., pitches itself online as DEBT Box, boosted by the defendants in hundreds of videos and social media posts, the SEC said. Company posts describe DEBT as “Decentralized eco-friendly blockchain technology” and “where crypto meets commodities.”
DEBT Box claims online to be an alternative to cryptocurrencies like Bitcoin or Ethereum, offering software “node licenses” that allow cloud mining that requires less energy. It also claims its projects are “supported by royalties from real-world industries and commodities production/sale.”
A company post on Medium gives this example: “D.E.B.T.’s partnerships with oil exploration and production companies allow for reduced exploration costs, improved efficiency, and more, resulting in higher revenue.” A percentage of that revenue, it said, “will be converted” to its Black Gold token.
But none of the company principals — brothers Jason and Jacob Anderson, Schad Brannon and Roydon Nelson — were registered crypto brokers, the SEC complaint claims, and the “‘real projects’ and ‘real assets’ [they] tout as supporting the value of these tokens are a sham.”
“And rather than use the investor funds generated from the sale of the node software licenses to support those underlying businesses,” the SEC alleges, “Defendants misappropriated the funds for their own personal gain — buying luxury vehicles and homes, taking lavish vacations, and showering themselves and their friends with cash.”
The agency obtained a temporary restraining order and asset freeze against Digital Licensing, Inc., which it said is registered in Wyoming but operating out of Draper. The injunction temporarily halts all business operations and freezes the assets of 18 defendants.
The frozen assets include properties in Utah, California and Wyoming, plus nearly 40 cars. Among the personal assets are a 2017 Ferrari with a “3RDW1FE” vanity plate and a 2021 Lamborghini with a “FUNDING” license plate, according to the temporary restraining order.
U.S. District Court Chief Judge Robert J. Shelly granted the order July 28. Federal court records don’t currently list attorneys for any of the defendants, and The Salt Lake Tribune was unable to immediately contact company representatives for comment.
In a complaint unsealed Wednesday, the SEC claims the 18 defendants — the company, its four principals, plus 13 other individuals and companies — offered unregistered crypto asset securities to hundreds of investors, raising $50 million. They also sold unspecified amounts of Bitcoin and Ether, two forms of cryptocurrency, the agency alleges.
The defendants were not crypto mining, as they claimed, but were creating each token instantaneously using a code on a blockchain, which is a shared database often used to track cryptocurrency transactions, the SEC said.
The company, its principals and some of the other defendants also lied to DEBT Box investors about the business revenues that they claimed were driving the value of the cryptocurrency they sold, the SEC claims. “The businesses simply did not and do not have the capabilities or revenues defendants repeatedly represented to investors,” the complaint said.
The SEC is seeking repayment for any “ill-gotten gains,” plus civil penalties. The court has appointed an attorney and a law firm, Josias N. Dewey of Holland & Night LLP, as the “temporary receiver” of the company. Dewey has control of the company and is authorized to “account for” and recover all of the company’s assets.
“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,” said Tracy S. Combs, director of the SEC’s Salt Lake Regional Office, in a statement.
“We filed this emergency action to protect the victims of the defendants’ unlawful actions and stop further harm,” Combs said.
Brothers Jason R. Anderson, 43, and Jacob S. Anderson, 40, are Utah residents who have described themselves to investors as co-founders and co-owners of DEBT Box, the SEC said.
Brannon, 50, is a California resident who is the current president of DEBT Box, and Nelson, also 50, of St. George, is the director, treasurer and secretary, it said.
They, and Utahns Ryan Bowen, 46; Mark Williams Schuler, 45; Benjamin Frank Daniels, 48; Joseph Anthony Martinez, 36; Matthew Dillon Fritzsche, 30; along with Utah companies B&B Investment Group and iX Global and out-of-state defendants, are accused of acting as unregistered brokers.
Recently, the “fraudulent, unregistered securities offering” was expanding, the SEC alleges, with the announcement of two new types of software licenses and a spin-off offering, the FAIR Project.
“In the past two months, certain defendants have taken steps to evade law enforcement,” the SEC added in its complaint. “DEBT Box has stated that it is in the process of moving its operations to the United Arab Emirates for the express purpose of evading the federal securities laws.”
In a June YouTube video, it added, Jacob Anderson announced “we have moved all of [DEBT Box’s] operations to Abu Dhabi” and claimed that DEBT Box is “under the jurisdictional control of Abu Dhabi, not the SEC.”
On June 26, 2023, iX Global — a multilevel-marketing business that promoted DEBT Box software licenses — began closing its American bank accounts, the SEC said, and it has since removed over $720,000 in investor funds from them.
Shannon Sollitt is a Report for America corps member covering business accountability and sustainability for The Salt Lake Tribune. Your donation to match our RFA grant helps keep her writing stories like this one; please consider making a tax-deductible gift of any amount today by clicking here.
