Two lawyers from the Securities and Exchange Commission (SEC) in the USA are said to have stepped down following harsh criticism from a federal judge over the agency’s “misuse of authority” and “unfair actions” in the Debt Box crypto case. The attorneys’ departures stem from allegations of improper conduct by the SEC during this high-profile investigation into crypto fraud.
Judge Cites SEC’s ‘Gross Abuse’ of Power
Based on recent news, Michael Welsh and Joseph Watkins, the main lawyers handling the SEC case against Debt Box, unexpectedly resigned earlier this month. Insiders disclosed that they were given notice of dismissal if they continued with the agency. This resignation came after a harsh judgment by Chief Judge Robert J. Shelby in Salt Lake City, Utah, who oversaw the trial.
In March, Judge Shelby reprimanded the SEC for providing false information and misrepresenting facts in their legal action against Digital Licensing Inc., also called Debt Box. According to the filing made on March 18th, the judge expressed that the SEC’s behavior amounted to a severe misuse of the authority granted to it by Congress and significantly harmed the honesty of these courtroom proceedings and the judicial system as a whole.
Debt Box Crypto Fraud Allegations
The SEC accused Debt Box of orchestrating a $50 million crypto fraud scheme in August 2022. In response, the agency requested an emergency order to halt the Utah company’s operations, seize its assets, and issue restraining orders against Debt Box’s leaders. However, Judge Shelby questioned the SEC’s evidence, expressing concern that it was presented with a lack of foundation, although it had been intentionally misrepresented.
The judge criticized the SEC for trying to subtly change the words used to conceal and continue wrongdoing, specifically pointing out inaccurate statements made by Welsh during a hearing. Judge Shelby’s strong criticism led to the resignations of Welsh and Watkins, who were relatively new employees based on their LinkedIn profiles.
Regulatory Scrutiny and Industry Criticism
The crypto community has been openly critical of the SEC’s actions under Chair Gary Gensler, specifically regarding their “enforcement-based regulation” tactic. Detractors claim that this method creates regulatory instability, hinders advancements, and weakens America’s position in the global digital asset marketplace.
Major crackdowns on cryptocurrency platforms have involved filing lawsuits against Coinbase and Binance, as well as upcoming actions regarding the decentralized finance platform Uniswap from the regulatory body. The Debt Box case and subsequent departures of SEC lawyers have added more heat to the ongoing discussion about how the agency manages crypto-related disputes.
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2024-04-23 00:02