A court has found the SEC getting some dates wrong in its Debt Box case constitutes bad faith.

Financial sanctions have been imposed and the SEC’s request to dismiss the case for refiling has been denied.

In a whopping 80-page Memorandum Decision and Order filed on March 18th, Chief District Judge Shelby concluded;

It is essential to keep the broader context in mind. The Commission came to the court seeking the extraordinary relief of an ex parte TRO together with a sweeping asset freeze and court-appointed receiver to assume control of Defendants’ companies.

It expressly traded on its special standing as a federal agency—reminding the court it had been granted this relief several times in the past ten years—to demonstrate it could be trusted when asking for this tremendous exercise of judicial authority.

An ex parte TRO is extraordinary relief that requires a fact-based compelling showing of the irreparable harm likely to result if the TRO is not granted.

The Commission argued the facts demonstrated this: Defendants were contemporaneously and rapidly shutting down their domestic bank accounts, transferring investor funds in those accounts overseas to place them beyond the reach of the court, and undertaking efforts to obstruct the Commission—suggesting Defendants were aware of the Commission’s investigation.

Relying on the Commission’s representations, the court granted the ex parte TRO, froze Defendants’ accounts and other assets, and appointed the requested Receiver. As a result, companies were seized, assets were frozen, and lives were upended.

In the end, once Defendants had notice and an opportunity to respond, each purportedly factual pillar the Commission constructed to make the required showing of irreparable harm crumbled under scrutiny.

It was not just a single imprecise statement or inadvertent misstatement. Each piece of support the Commission offered in seeking the TRO—and then later reiterated in defending the TRO—proved to be some combination of false, mischaracterized, and misleading.

Further, the Commission not only repeated and affirmed its misrepresentations in the face of contrary evidence, it presented new falsehoods to the court in an effort to subtly shift from its previous misrepresentations without acknowledging its previous errors.

The Commission’s conduct demonstrated it knew its representations were false and it was deliberately perpetuating those falsehoods—continuing to abuse the judicial process in defense of the ex parte TRO that should not have issued.

Characterizing the SEC’s conduct, specific to getting dates wrong and the subsequent fallout, as “a gross abuse of power” warranting sanctions, Judge Shelby ordered the SEC to cover

  • attorney’s fees
  • costs and expenses associated with the appointment of the Debt Box Receiver and
  • payment of all the Debt Box Receiver’s costs and fees

In denying the SEC’s motion to dismiss, which would effectively allowed the case to start over, Judge Shelby noted “the
Commission provides no legal authority or argument in support of its request”.

This was deemed a violation of Utah’s Local Rules, leading to the denial.

It’s important to note the SEC’s bad faith is restricted only to the process of obtaining ex-parte relief by way of a TRO, preliminary injunction and appointment of a Receiver.

It does not pertain to the underlying $49 million in fraud alleged by the SEC.

I know I might sound like I’m trivializing the SEC’s conduct with respect to the cited “bad faith”, but legal procedure and judicial enforcement of such falls beyond the scope of BehindMLM.

Our interest is in seeing Debt Box and iX Global held accountable for defrauding consumers out of tens of millions of dollars.

Even more so that, perhaps emboldened by the SEC’s mistakes, Debt Box and iX Global have doubled down.

Having personally identified iX Global’s securities fraud back in 2021, that part of the SEC’s case is solid. Given the underlying evidence, the SEC being unable to hold Debt Box and iX Global accountable would be a travesty.

As to what happens next, this is uncharted territory. I suspect the SEC’s case will continue based on the underlying evidence the SEC has gathered with respect to the broader alleged securities fraud.

Judge Shelby was careful to point out the court

has not yet had occasion to evaluate the underlying merits of this action beyond whether the Commission’s representations in furtherance of obtaining and defending its ex parte TRO align with the facts presented.

This Order focuses exclusively on the Commission’s conduct and should not be construed as offering any views on the underlying merits of the case.

At time of publication Debt Box’s and iX Global’s attempts IN8 NFT grift has flopped. As of February 2024, traffic to In8’s website was too low for SimilarWeb to track.

iX Global founder Joe Martinez (right) remains a wanted fugitive in India.

As part of an ongoing criminal case tied to iX Global’s business operations in India and Dubai, an arrest warrant was issued against Martinez last October.

Whether US authorities are building a parallel criminal case is unclear.

We’ll be periodically checking the SEC’s Debt Box and iX Global case docket for updates.