Two SEC Lawyers Exit After Judge Sanctions Agency in DEBT Box Case
According to a recent report by Bloomberg, two Securities and Exchange Commission (SEC) lawyers have resigned following a federal judge’s rebuke of the agency for its handling of a crypto case against DEBT Box.
According to sources familiar with the matter, Michael Welsh and Joseph Watkins resigned after an SEC official threatened to fire them if they decided to stay.
Key points:
- SEC lawyers Michael Welsh and Joseph Watkins resigned after being told they would be fired if they stayed.
- Federal Judge Robert Shelby sanctioned the SEC for “gross abuse” of power in the DEBT Box case.
- The SEC’s lawsuit against DEBT Box was framed by false statements, misrepresentations, and a lack of evidence.
- Judge Shelby reversed an asset freeze after finding that the SEC may have made “materially false and misleading representations.”
- Gurbir Grewal, the head of SEC enforcement, expressed regret to the court for the actions of his department.
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In July, the SEC filed a lawsuit against DEBT Box, accusing the company and its executives of defrauding investors of at least $49 million. At the regulator’s request, Judge Shelby initially froze the company’s assets and placed the firm into receivership. However, the judge later reversed the asset freeze after discovering that the SEC might have made “materially false and misleading representations.”
Judge sanctioned the SEC for abuse of power
In March, Judge Shelby took the extraordinary step of sanctioning the SEC for “gross abuse of the power entrusted to it by Congress.” Additionally, the judge ordered the agency to pay some of DEBT Box’s attorney’s fees.
The judge faulted arguments made by Welsh, the SEC’s lead trial attorney on the case, and evidence provided by Watkins and his team. Watkins served as the agency’s lead investigative attorney on the matter.
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Attorneys for DEBT Box and other parties submitted petitions last week asking the SEC to reimburse almost $1.5 million in fees and other expenses related to the lawsuit. Judge Shelby has not yet made a decision on the SEC’s move to dismiss the DEBT Box case.
The SEC’s handling of the DEBT Box case has raised concerns about the regulator’s approach to crypto-related enforcement actions and the need for greater oversight and accountability.
