Two United States Securities and Exchange Commission (SEC) lawyers, Michael Welsh and Joseph Watkins, have resigned from their roles after allegations of “gross abuse” of power in a cryptocurrency case, according to an insider report. The lawyers were the head counsel in the SEC lawsuit against DEBT Box, a crypto platform. Speculation suggests that they were advised to leave or face termination.
Both attorneys were relatively recent additions to the SEC. Welch began his term as a trial attorney in December 2022, while Watkins participated in the Division of Enforcement from January 2023 onwards. Their joint resignation follows a March court decision wherein the SEC received sanctions for making false statements in its case against DEBT Box, then known as Digital Licensing Inc.
The ruling judge, Chief Judge Robert J. Shelby, called out the SEC for the “gross abuse of the power entrusted to it by Congress.” Shelby noted that the false evidence provided had severely undermined the judicial proceedings’ integrity. To halt a purported $50-million crypto fraud scheme, the SEC froze DEBT Box’s assets temporarily and procured restraining orders against the company’s top executives in August 2023.
The SEC’s stern enforcement efforts, particularly those led by Chair Gary Gensler, have drawn criticism from the crypto industry. Critics argue that this aggressive “regulation by enforcement” strategy has created more regulatory uncertainty, impeded innovation, and potentially compromised U.S. competitiveness in the digital asset space. The ongoing investigations against high-profile entities such as Coinbase, Binance, and Uniswap further validate these concerns.