SEC Lawyers Resign Following ‘Gross Abuse of Power’ in Crypto Case
In a shocking turn of events, SEC lawyers Michael Welsh and Joseph Watkins have resigned after a federal judge sanctioned the regulator in a crypto case against Digital Licensing Inc., also known as DEBT Box. Judge Robert Shelby found that the SEC had made false statements, misrepresentations, and lacked evidence in its case against the digital asset firm, which was accused of a $49 million crypto fraud scheme.
The lead attorneys in the DEBT Box case were reportedly told by SEC officials that they would be terminated if they stayed, according to a Bloomberg report on April 22. This latest development has put the SEC on the backfoot once again, as Judge Shelby rebuked the regulator’s conduct, reversed an asset freeze on DEBT Box, and ordered the SEC to pay some of the firm’s legal fees as a sanction.
The judge also criticized arguments made by attorney Welsh and evidence provided by investigative attorney Watkins. In one instance, Welsh claimed that DEBT Box was closing bank accounts and transferring assets overseas, but the court found this to be untrue. DEBT Box was just one of many crypto companies facing lawsuits from the SEC for allegedly defrauding investors through the sale of unregistered securities.
This setback is the latest in a series of defeats for the SEC in high-profile crypto court cases, with ongoing lawsuits against companies like Coinbase and Ripple. Ripple CEO Brad Garlinghouse commented on the resignations, stating that it feels appropriate that his firm files its response on the same day that the SEC lawyers resigned for their misconduct in the DEBT Box case.
Popular trader and investor “DCinvestor” also weighed in, stating that “rotten cultures start at the top.” Additionally, ConsenSys product manager Jimmy Ragosa claimed to have been one of the SEC lawyers who resigned, joking about his role in leading meetings with ETH ETF issuers.
The news of the resignations has sent shockwaves through the crypto community, with many questioning the SEC’s handling of crypto cases and calling for accountability. As the fallout from this latest scandal continues to unfold, it remains to be seen how the SEC will address the allegations of misconduct and abuse of power in the DEBT Box case.
