SEC lawyers resign after ‘gross abuse’ of power in crypto case — Report

Two SEC attorneys are said to have stepped down following the reprimand by a federal judge for excessive use of authority and unfair conduct in a digital currency investigation.

Based on a Bloomberg article published on April 22, attorneys Michael Welsh and Joseph Watkins, who lead the legal team against crypto platform DEBT Box, recently stepped down from their roles. Insiders revealed that the lawyers were given notice they would be let go if they continued in their positions.

Two attorneys at the agency, Waters and Watkins, were relatively inexperienced based on their LinkedIn profiles. Waters joined the SEC as a trial attorney towards the end of 2022, while Watkins began working for the Division of Enforcement in early 2023.

After Judge Robert J. Shelby’s court ruling against them in Salt Lake City, Utah, in March, the pair chose to resign. The judge had previously penalized the SEC for making false statements and misrepresentations during their legal action against Digital Licensing Inc., or DEBT Box.

In his filing on March 18, Judge Shelby expressed that the actions of the Commission amounted to an excessive misuse of the authority given to them by Congress and significantly harmed the trustworthiness of these court cases and the judicial system as a whole.

In August 2023, the Securities and Exchange Commission (SEC) requested an emergency order to stop the operations of a Utah company called DEBT Box. This action temporarily seized their assets and issued restraining orders against the company’s leaders. The SEC made these moves based on allegations of a $50-million crypto fraud scheme.

In their argument, Judge Shelby pointed out that the evidence brought forth had no foundation and was instead presented in a intentionally deceptive and misleading manner.

“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.”

Critics in the cryptocurrency sector have been openly critical of the Securities and Exchange Commission (SEC) and its chairman, Gary Gensler, for their regulatory tactics. A major point of contention is the SEC’s “enforcement-focused” approach to regulation, which some believe heightens regulatory ambiguity in the industry, restricts innovation, and weakens America’s position as a global leader in digital assets.

Authorities have taken notable steps to crack down on cryptocurrency platforms, such as filing lawsuits against Coinbase and Binance, and planning further moves against Decentralized Finance platforms like Uniswap.

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2024-04-22 23:04