SEC prosecutors resign after
Two lawyers from the SEC, Michael Welsh and Joseph Watkins, have resigned due to “materially false and misleading representations” made in a crypto case last year. The two attorneys were reportedly given the choice to resign from the securities regulator or face termination, following their roles in the lawsuit against Digital Licensing Inc., also known as DEBT Box.
Bloomberg first broke the news on April 22, citing anonymous sources familiar with the situation, who confirmed that Welsh and Watkins left the SEC earlier this month. The resignations followed a reprimand from Federal District Court Judge Robert Shelby, who criticized the SEC for abuse of power in the DEBT Box case. Welsh was the primary attorney for the Commission, and Watkins led the investigative team.
In July, DEBT Box and its founders were accused of defrauding investors of over $49 million. Welsh and Watkins argued that the crypto firm was moving funds offshore and successfully petitioned Judge Shelby to freeze DEBT Box’s assets. DEBT Box was placed in receivership as an additional measure.
However, Judge Shelby later reversed his decision after further reviewing the commission’s arguments, finding that the duo had made false statements in court. Gurbir Grewal, the Director of the SEC’s Division of Enforcement, subsequently apologized for the apparent misconduct, and the court ruled that DEBT Box should be compensated for legal fees.
Following the sanctions against the SEC, federal prosecutors moved to dismiss the case without prejudice. Consequently, DEBT Box is now suing the regulator and seeking approximately $1.5 million in damages.
