SEC Attorneys Resign Amid Allegations of Misconduct in DEBT Box Crypto Case
Summary:
Two leading attorneys for the U.S. Securities and Exchange Commission (SEC), Michael Welsh and Joseph Watkins, have resigned following accusations of severe misuse of power and dishonesty in a crypto case. This follows Chief Judge Robert J. Shelby's criticism of the SEC's conduct in its case against DEBT Box, saying the evidence was not only baseless but also deliberately misleading. The case has added fuel to criticism of the SEC's enforcement strategies, which are seen as creating regulatory ambiguity and hindering innovation in the digital asset industry.
After an instance of severe misuse of power and dishonest behavior in a crypto-related lawsuit was exposed, two leading attorneys working for the U.S. Securities and Exchange Commission (SEC) have stepped down from their roles. Michael Welsh and Joseph Watkins, who were at the forefront of a case involving crypto platform DEBT Box, voluntarily left their posts in early April, as reported by Bloomberg on 22nd April. Insiders disclosed that the attorneys had been told their jobs would be terminated if they chose to stay on.
Welsh had been employed as a trial attorney at the SEC since December 2022, and Watkins had started his role as a Division of Enforcement attorney in January 2023, according to their LinkedIn profiles. This indicates that both were relatively recent hires.
Their exit came in the wake of a legal judgement – delivered by Chief Judge Robert J. Shelby, who presided over the case in Salt Lake City, Utah – which critically admonished the SEC for deceitful conduct and making untruthful statements in its case against Digital Licensing Inc., also called DEBT Box.
On March 18, Judge Shelby’s stated in his filing that the SEC’s conduct under scrutiny “represents a severe misuse of the authority assigned to it by Congress, and has substantially compromised the integrity of these proceedings as well as the judicial process as a whole."
The SEC had previously been able to implement an emergency relief in August 2023 to suspend DEBT Box, a company located in Utah. The company’s assets had been temporarily frozen, and restraining orders were issued against its principals on the basis of an alleged cryptocurrency fraud scheme worth $50 million.
However, Judge Shelby pointed out that the evidence presented by the SEC not only was baseless but was also submitted in a deliberate and misleading manner. He mentioned, “Welsh was aware that his statement from the TRO hearing was inaccurate. Instead of rectifying the error, he and the SEC tried to subtly alter the wording to downplay and continue the misconduct."
The approach adopted by Gary Gensler, the Chair of the SEC, - especially the strategy of "regulating by enforcement"- has stirred up substantial controversy in the cryptocurrency industry. Critics claim that such strategies ramp up regulatory ambiguity, hamper innovation, and threaten the United States' competitive edge in the digital asset sector.
Noteworthy interventions by the SEC against cryptocurrency platforms encompass lawsuits against crypto exchanges Binance and Coinbase, as well as the impending action concerning the decentralized finance platform Uniswap.
Published At
4/22/2024 10:50:47 PM
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