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In the SEC lawsuit against the crypto platform DEBT Box, the lead attorneys, Michael Welsh and Joseph Watkins, resigned after the gross abuse of power was found in the case.
Michael Welsh and Joseph Watkins Resign
Two lawyers of the United States Securities and Exchange Commission (SEC) reportedly resigned after a district court sanctioned the agency for illegitimate use of power and acting in bad faith in a crypto case.
On April 22, a Bloomberg report confirmed the resignation of Michael Welsh and Joseph Watkins, the lead attorneys in the case against the crypto platform DEBT Box, who resigned at the beginning of this month. The other lawyers familiar with the case and other sources were warned that they would be terminated if they stayed.
As mentioned on their LinkedIn profiles, these lawyers were relatively new to the agency. Welsh served as a trial attorney at the SEC from December 2022, whereas Watkins started working as an attorney at the Division of Enforcement beginning in January 2023.
The duo’s resignation followed a court decision from Chief Judge Robert J. Shelby, the federal judge hearing the case in Salt Lake City, Utah. In March, Judge Shelby charged the SEC for allowing false statements and misrepresentations in its case against Digital Licensing Inc., known as DEBT Box.
Sanction Against SEC
In the March 18 filing, Judge Shelby said that the “Commission’s above-discussed conduct constitutes a gross abuse of the power entrusted to it by Congress and substantially undermined the integrity of these proceedings and the judicial process.”
In August 2023, the SEC obtained an emergency relief to freeze the operations of a Utah-based company. It temporarily froze its assets and obtained restraining orders against DEBT Box’s principals brought under a claim of a $50 Million crypto fraud scheme.
She further said that the presented evidence lacks any basis and is presented in purposefully false and misleading ways.
Judge Shelby said, “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.”
Take Of Crypto Industry
Since Gary Gensler was chairperson, the crypto industry has always been outspoken about criticism of the SEC’s approach. Some critics argue that Gensler’s approach has increased regulatory uncertainty in the sector, halted and restricted innovation, and undermined the U.S.’s competitiveness in the digital asset space.
There have been high-profile enforcement actions against crypto platforms, which include lawsuits against crypto exchanges Coinbase and Binance, as well as the agency’s upcoming actions over the decentralized finance platform Uniswap.
Moreover, the crypto organizations and the SEC have previously had a supportive relationship with government agencies. Some popular companies in the U.S. have sometimes had serious arguments with the financial regulator.
According to the report, the SEC has already moved to dismiss the case against Debt Box, but the judge has yet to respond.
Anurag is working as a fundamental writer for The Coin Republic since 2021. He likes to exercise his curious muscles and research deep into a topic. Though he covers various aspects of the crypto industry, he is quite passionate about the Web3, NFTs, Gaming, and Metaverse, and envisions them as the future of the (digital) economy. A reader & writer at heart, he calls himself an “average guitar player” and a fun footballer.
