SEC lawyers quit amid another legal blow for agency: report

A Bloomberg report says that two US Securities and Exchange Commission (SEC) lawyers have resigned after the latest criticism levelled against the securities regulator.

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Judge sanctions SEC for “gross abuse” of power

The lawyers’ resignations come after federal Judge Robert Shelby ruled that the SEC’s case against Digital Licensing Inc., or Debt Box, was replete with “false statements and misrepresentations.”   

Specifically, the report highlights recent events where a Utah judge sanctioned the SEC, sharply reprimanding it for “gross abuse” of power.” The two lawyers are said to be Michael Welsh and Joseph Watkins.

According to the Bloomberg report, the under-fire SEC, which has in the last few months suffered significant legal blows, allegedly planned on firing the two lawyers. Welsh and Watkins are reported to have stepped aside earlier this month.

In its lawsuit against Debt Box, the SEC has alleged the platform defrauded investors of $49 million.

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The case saw the crypto company’s assets frozen before a court’s decision reversed the action. The SEC acknowledged “errors” in its lawsuit agaist Debt Box in December and has also sought to dismiss the case.

Last year, a judge sharply criticised the SEC’s approach in the rejection of Grayscale’s application to convert its GBTC to a spot Bitcoin ETF. The outcome of the case helped accelerate the eventual approval of several spot Bitcoin ETFs in the US. It includes the high-flying BlackRock’s IBIT.

SEC also lost against Ripple when a US judge declared XRP was not a security. These losses came as the broader crypto industry believes the agency’s regulation by enforcement actions is dragging the US behind other top tier jurisdictions.

Current cases before the courts and involving the SEC vs. crypto companies includes that of Terraform Labs, Coinbase and Binance among others.