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SEC Attorneys Resign Amid Controversy Over DEBT Box Case
Two lawyers from the Securities and Exchange Commission (SEC), Michael Welsh and Joseph Watkins, resigned on April 22 following a federal judge’s sanction and severe criticism of the regulatory agency’s handling of a crypto-related case.
Reasons for Resignation
According to sources familiar with the matter, Welsh and Watkins stepped down after an SEC official informed them that they would face termination if they stayed. The attorneys were leading the SEC’s case against Digital Licensing Inc., the parent company for the aforementioned crypto platform, DEBT Box.
Criticism and Sanctions
The lawsuit against DEBT Box was marred by allegations of false statements, misrepresentations, and a lack of evidence, as stated by Robert Shelby, the federal district court judge in Salt Lake City overseeing the case. In March, Shelby sanctioned the SEC for what he deemed “gross abuse” of power, prompting an apology from the SEC’s head of enforcement for the agency’s missteps.
Judge’s Critique
Judge Shelby criticized Welsh’s arguments and the evidence Watkins and his team provided. One instance highlighted by the court involved Welsh’s claim that DEBT Box was closing bank accounts and transferring assets overseas, which was found to be untrue. The SEC attributed this error to a miscommunication, and Welsh apologized to the court.
Response and Consequences
In response to the court’s scrutiny, SEC enforcement chief Gurbir Grewal expressed regret for the department’s actions and announced measures to address the situation, including appointing new attorneys and mandating training for enforcement staff. Subsequently, motions have been filed seeking reimbursement from the SEC for legal fees and other expenses totaling over $1.5 million incurred during the case.
Ian is a cryptocurrency enthusiast blending humor with professionalism. With an engineering background and a storyteller's heart, he simplifies the blockchain world with sharp analysis and a touch of wit. At Cryptowire, he brings his unique perspective to make digital financial innovation accessible to all.
