The Securities and Exchange Commission (SEC) faced embarrassment after a federal judge rebuked the agency for misconduct in a cryptocurrency case. Judge Robert Shelby of the U.S. District Court in Utah sanctioned the SEC for “gross abuse” of power in its case against Digital Licensing Inc., known as DEBT Box.
Shelby found the SEC made false claims, and misrepresentations, and lacked evidence against the crypto firm. He ordered the agency to pay some of DEBT Box’s legal fees. The judge criticized the SEC’s lead attorneys, Michael Welsh and Joseph Watkins, for their failings.
In an unusual move, Welsh and Watkins resigned this month after being told they would be terminated over the botched case. SEC enforcement chief Gurbir Grewal apologized to the court and assigned new lawyers to the matter.
The SEC initially alleged DEBT Box defrauded investors of $49 million and froze the company’s assets. But the judge reversed those actions, finding the SEC’s accusations lacked merit.
The situation raises questions about the SEC’s pursuit of cryptocurrency cases. Critics argue the agency overstepped its authority and must improve its investigations and legal arguments regarding digital assets. The SEC has moved to dismiss its DEBT Box case but must repair its credibility.
