Two of the SEC’s attorneys, Michael Welsh and Joseph Watkins, resigned from the agency last year due to “substantially false and misleading statements” made in the cryptocurrency case.
The two were reportedly told to quit or be fired by the securities regulator, depending on their roles in the lawsuit against Digital Licensing Inc., commonly known as DEBT Box.
Bloomberg first reported the news on April 22, citing unnamed sources familiar with the matter who confirmed that Wales and Watkins had resigned from the U.S. SEC earlier this month.
The resignation came after Federal District Court Judge Robert Shelby reprimanded the SEC for abuse of power in the DEBT Box case. In this case, Welsh was the commission’s lead attorney and Watkins led the investigative team.
SEC vs Debt Box
Last July, DEBT Box and its founders were accused of stealing more than $49 million from investors. Welsh and Watkins petitioned Judge Shelby and the court to freeze their assets, claiming the cryptocurrency company was moving funds overseas. The motion was granted and DEBT Box was placed into receivership with further action.
But Judge Shelby overturned the decision after further reviewing the board’s arguments, finding that the two men had made false statements to the court. SEC Enforcement Division Director Gurbir Grewal later apologized for the apparent misconduct, and the court decided that DEBT Box should receive financial compensation for its legal costs.
After sanctions against the Wall Street watchdog, federal prosecutors filed a motion to dismiss the case without prejudice. As a result, DEBT Box is suing regulators and seeking approximately $1.5 million in damages.