Two attorneys from the U.S. Securities and Exchange Commission (SEC), Michael Welsh and Joseph Watkins, have resigned following a district court’s harsh criticism of the agency’s conduct in a cryptocurrency case.
According to a Bloomberg report dated April 22, the lawyers stepped down earlier in the month after being warned of potential termination.
Welsh and Watkins, who were relatively recent additions to the SEC, were leading the case against DEBT Box, a crypto platform.
Welsh joined the SEC as a trial attorney in December 2022, and Watkins started as an attorney in the Division of Enforcement in January 2023, their LinkedIn profiles show.
Their resignations came in the wake of a decision by Chief Judge Robert J. Shelby, who presided over the case in Salt Lake City, Utah.
In March, Judge Shelby rebuked the SEC for making false statements and misrepresentations in its lawsuit against Digital Licensing Inc., also known as DEBT Box.
He criticized the SEC for a “gross abuse of the power entrusted to it by Congress,” which he said “substantially undermined the integrity of these proceedings and the judicial process.”
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In his March 18 filing, Judge Shelby articulated that the evidence presented by the SEC “lacked any basis” and was put forth in “deliberately false and misleading ways.”
He specifically noted that Welsh was aware of inaccuracies in his statements during a temporary restraining order (TRO) hearing, but instead of correcting these errors, “he and the Commission attempted to subtly shift the language to gloss over and perpetuate the misconduct.”
Earlier, in August 2023, the SEC had secured emergency relief against DEBT Box, temporarily freezing the Utah-based company’s assets and issuing restraining orders against its principals, accusing them of a $50 million crypto fraud scheme.
The crypto industry has frequently criticized the SEC’s regulatory tactics under Chair Gary Gensler, particularly attacking the so-called “regulation by enforcement” strategy.
Critics argue this approach has bred regulatory uncertainty, stifled innovation, and diminished the competitiveness of the U.S. in the global digital asset market.
This criticism follows amidst high-profile SEC actions against major crypto platforms like Coinbase and Binance, and anticipated enforcement against the decentralized finance platform Uniswap.
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