According to a report by Bloomberg on April 22, two attorneys representing the U.S. Securities and Exchange Commission (SEC), Michael Welsh and Joseph Watkins, have stepped down from their positions earlier in the month.
Two SEC attorneys resign
This development follows a district court’s decision to penalize the agency for its “severe misuse” of authority and engaging in actions with “malintent” during a legal battle involving the cryptocurrency firm DEBT Box. According to the report, the lead lawyers were dismissed after they were informed of the potential for their dismissal should they choose to remain in their roles.
The attorneys, both of whom had recently joined the agency according to their LinkedIn profiles, included Welsh, who had been a trial attorney with the SEC since December 2022, and Watkins, who had been working in the Division of Enforcement starting January 2023. Their departure came in the wake of a ruling by Chief Judge Robert J. Shelby, who presided over the case in Salt Lake City, Utah. In March, Judge Shelby reprimanded the SEC for providing false testimony and making misleading statements in its lawsuit against Digital Licensing Inc., also referred to as DEBT Box.
In the document filed on March 18, Judge Shelby observed that the Commission’s actions were a severe misuse of the authority given to it by Congress, significantly compromising the credibility of the proceedings and the judicial system. In August 2023, the SEC secured an emergency order to stop the activities of the company based in Utah, effectively freezing its assets and imposing restraining orders on the executives of DEBT Box, alleging involvement in a cryptocurrency fraud scheme valued at $50 million.
Financial and Organizational Impact on the SEC
In December, Gurbir Grewal, who leads the SEC’s enforcement division, issued an apology to the court for his department’s conduct. He declared that new attorneys would be assigned to the case and mandated training for the agency’s enforcement personnel.
Last week, legal representatives for DEBT Box and associated parties submitted applications demanding over $1.5 million from the SEC to cover legal expenses and other costs related to the lawsuit.
At the beginning of this month, the SEC proposed dropping the lawsuit against DEBT Box, but without making a final decision. Shelby’s decision on the proposal is still pending.
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