Two SEC Lawyers Resign After Agency Censured for Abuse of Power in Crypto Case

Two Securities and Exchange Commission lawyers resigned after a federal judge sanctioned and sharply rebuked the Wall Street regulator for “gross abuse” of power in a crypto case.

Michael Welsh and Joseph Watkins stepped down this month after an SEC official told them that they would be terminated if they stayed, according to people familiar with the matter. The pair were lead attorneys on a case against Digital Licensing Inc., a crypto platform known as DEBT Box.

The regulator’s lawsuit against DEBT Box was marred by false statements and misrepresentations, as well as a lack of evidence, according to Robert Shelby, the federal district court judge in Salt Lake City who is hearing the case. Shelby took the extreme step of sanctioning the agency for abuse of power in March, and the SEC’s head of enforcement has apologized for the missteps.

Neither Welsh nor Watkins, who were based out of the regulator’s Salt Lake City office, responded to phone calls requesting comment. The SEC declined to comment, as did a representative of the union representing agency staff.