2 SEC Lawyers Resigned For Alleging Gross Abuse Of Power In Crypto Case

Key Points:

• 2 SEC lawyers resign following a federal judge’s sanction for the SEC’s “gross abuse of power” in pursuing a restraining order against Debt Box.
• Judge Robert Shelby expressed concern over the SEC’s misleading statements in the case.
• The incident highlights criticisms of the SEC’s regulatory approach under Chair Gary Gensler.

Two lawyers at the U.S. Securities and Exchange Commission (SEC) were forced to resign following a federal judge’s sanction of the agency for what was termed a “gross abuse of power” in its pursuit of a temporary restraining order against Utah-based crypto company Debt Box. The approval came last month, as revealed in a report by Bloomberg on Monday.

2 SEC Lawyers Resign Over Abuse of Power

Michael Welsh, who previously led the legal team handling the Debt Box case, and Joseph Watkins, who formed the core of the SEC’s case against Debt Box, were reported given the ultimatum to resign or face termination. SEC lawyers resigned in silence and were only revealed by those familiar with the matter.

According to a court filing on April 15, Welsh “is no longer employed by the Securities and Exchange Commission,” while Watkins’ LinkedIn profile indicates he is still with the agency.

In December, U.S. Chief District Judge Robert Shelby expressed concerns over the SEC’s pursuit of the restraining order, stating that the Commission had made false and misleading representations, undermining the integrity of the proceedings.

Both lawyers were relatively new to the SEC, as per their LinkedIn profiles. Welsh joined as a trial attorney in December 2022, while Watkins started as an attorney at the Division of Enforcement in January 2023.

Criticism Mounts Over SEC’s Regulatory Tactics

The lawsuit against Debt Box was fraught with false statements and misrepresentations, leading Judge Shelby to sanction the SEC for abuse of power in March. The agency’s enforcement head has since apologized for the missteps.

SEC lawyers resign after Judge Shelby’s decision to sanction the SEC for false statements and misrepresentations in the case against Debt Box.

The development shows criticisms from the crypto industry regarding the SEC’s regulatory approach under Chair Gary Gensler, particularly its regulation by enforcement strategy, which some argue has increased uncertainty and stifled innovation in the digital asset space.