Home Editor's Pick SEC Faces Shakeup After Judge Blasts Lawyers in DEBT Box Suit

SEC Faces Shakeup After Judge Blasts Lawyers in DEBT Box Suit

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Two lawyers from the Securities and Exchange Commission (SEC), Michael Welsh and Joseph Watkins, have stepped down from their roles after Robert Shelby, the Chief United States district judge of the United States District Court for the District of Utah, criticized and sanctioned the handling of the SEC in a case involving crypto company Digital Licensing Inc. (DEBT Box), according to Bloomberg.

As reported, the lawyers abused their power by making false statements, misrepresentations, and failing to provide adequate evidence. Their departures are remarkable due to their direct connection to the SEC’s legal action against DEBT Box.

The SEC’s lawsuit against DEBT Box faced sharp criticism from Judge Robert Shelby. The honorable judge denounced the lawsuit for containing false statements and lacking sufficient evidence to substantiate its claims. This critical evaluation shed light on the shortcomings of the SEC’s case.

As a consequence of the court’s scrutiny, Judge Shelby took decisive action by ordering the SEC to assume responsibility for a portion of DEBT Box’s legal expenses.

The SEC is Playing Fast And Loose

Gurbir Grewal, the enforcement chief of the SEC, admitted that the agency needs improvement and publicly apologized for the agency’s conduct. To rectify the situation, Grewal initiated changes within the SEC, including appointing new attorneys to handle the DEBT Box case and implementing mandatory training programs for the enforcement staff. These measures were aimed at preventing similar missteps in the future and rebuilding public trust.

Meanwhile, DEBT Box’s legal representatives filed motions seeking reimbursement of over $1.5 million in fees and costs incurred during the case. The SEC, however, countered by trying to get the case dropped without admitting fault. Judge Shelby’s decision will determine if the case goes forward or will come to a resolution.

Last July, the regulator sued DEBT Box- a decentralized blockchain network that uses eco-friendly technology to help people cover their household debt and is being backed by commodities and assets, such as gold, silver, platinum, oil, natural gas, agriculture, real estate, and royalties, accusing it of defrauding investors, opening a new tab of nearly $50 million.

The SEC accused DEBT Box of attempting to transfer its assets abroad. Referring to a YouTube video released by the company, it asserted that DEBT Box was relocating its activities to the United Arab Emirates as a means to circumvent United States securities laws.

Time For Retribution

The SEC’s action against DEBT Box is considered unfair or excessive. As reported, its “abuse of power” made it impossible for DEBT Box’s owners to pay their staff, leading to the cancellation of loans, and causing credit card companies and banks to decline cooperation with them in DEFT’s filing.

Two lawyers’ resignations from the SEC have fueled rumors that SEC chair Gary Gensler may also resign.

The SEC frequently faces criticism for its aggressive stance toward cryptocurrency firms, with its chair, Gary Gensler, being a vocal skeptic of the industry. However, a reporter said Gensler is unlikely to resign voluntarily and the White House may block him from doing so.

The SEC functions as an autonomous body within the federal government of the United States and supervises securities exchanges, brokers, dealers, investment advisors, and mutual funds intending to foster equitable transactions, ensuring the disclosure of significant market information, and combating fraud.

Under Gensler’s leadership, the SEC has initiated numerous lawsuits against crypto entities.

Similar to the DEBT Box’s case, Binance also faces struggles following the SEC’s charges against the exchange in June last year.. In court documents dated March 5, Binance.US COO Christopher Blodgett revealed that the exchange had to lay off over 200 staff, equivalent to two-thirds of the workforce.

Blodgett added that the lawsuit also caused the exchange’s revenue to decrease by 75%. The number of corporate partners has also decreased from 20 to 5 in a few months.

The post SEC Faces Shakeup After Judge Blasts Lawyers in DEBT Box Suit appeared first on Blockonomi.

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