Two SEC lawyers reportedly resign following district court sanctions for “gross abuse” of power and acting in “bad faith” in a crypto case.
Following a district court sanctioned the United States Securities and Exchange Commission (SEC) for “egregious abuse” of authority and “bad faith” conduct in a cryptocurrency case, two SEC attorneys reportedly tendered their resignations.
Michael Welsh and Joseph Watkins, the leading solicitors in the case against the cryptocurrency platform DEBT Box, reportedly tendered their resignations earlier this month, as reported by Bloomberg on April 22. According to sources with knowledge of the situation, the attorneys were threatened with termination if they persisted.
According to their LinkedIn profiles, both solicitors were reasonably recent additions to the firm. Welsh assumed the role of a trial attorney at the SEC in December 2022. In contrast, Watkins commenced his legal career at the Division of Enforcement in January 2023.
The two individuals resigned in response to a ruling rendered by Chief Judge Robert J. Shelby, the federal judge presiding over the case in Salt Lake City, Utah. Judge Shelby sanctioned the SEC in March for making deceptive statements and misrepresentations in its litigation against DEBT Box, also called Digital Licencing Inc.
In the filing dated March 18, Judge Shelby stated, “The conduct above of the Commission is a severe misuse of the authority bestowed upon it by Congress and significantly compromised the credibility of these proceedings and the judicial system.”
The SEC obtained emergency relief to suspend the Utah-based company in August 2023. This included restraining orders against DEBT Box’s principals and temporarily freezing its assets. The SEC was investigating allegations of a $50 million cryptocurrency fraud scheme.
Judge Shelby added that the presented evidence was “deliberately false and misleading” despite it ” lacking any basis.”
“Welsh knew his statement from the TRO hearing was incorrect. Rather than correcting the misstatement, he and the Commission attempted to subtly shift the language to gloss over and perpetuate the misconduct.”The cryptocurrency sector has expressed strong disapproval of the SEC’s methodology during the tenure of Chair Gary Gensler, specifically about the organization’s “regulation by enforcement” approach. Confident analysts contend that this methodology has exacerbated regulatory ambiguity within the sector, impeding novel ideas and eroding the United States’ competitive position in the digital assets domain.
Prominent enforcement measures targeting cryptocurrency platforms consist of pending legal proceedings against Coinbase and Binance, two prominent cryptocurrency exchanges, and Uniswap, a decentralized finance platform.
