According to Bloomberg, Michael Welsh and Joseph Watkins, two lead attorneys, resigned this month following an SEC official's warning of termination if they remained in their positions. This information comes from individuals who are familiar with the situation. Welsh and Watkins were the primary lawyers in a case against Digital Licensing Inc., a cryptocurrency platform also known as DEBT Box.
The SEC's lawsuit against DEBT Box was tainted by false statements, misrepresentations, and a lack of evidence. Neither Welsh nor Watkins, who were stationed at the regulator's Salt Lake City office, responded to requests for comment. The SEC, as well as a representative of the union representing agency staff, also declined to comment.
In July, the SEC accused DEBT Box and its executives of defrauding investors of at least $49 million. The regulator requested that the company's assets be frozen and the firm be put into receivership. However, this asset freeze was reversed after it was discovered that the SEC may have made 'materially false and misleading representations.' The judge criticized arguments from Welsh, the SEC's lead trial attorney on the matter, and evidence provided by Watkins and his team.
Welsh had informed the judge that DEBT Box, based in Draper, Utah, was closing bank accounts and transferring assets overseas. The court found this to be untrue. An SEC investigator later stated that a miscommunication led to the error, and Welsh apologized to the court.
In December, the SEC enforcement chief declined to comment. A lawyer for DEBT Box also declined to comment. Last week, attorneys for DEBT Box and other parties filed motions requesting that the SEC pay more than $1.5 million in fees and other costs incurred in the case. Earlier this month, the SEC moved to dismiss the case against DEBT Box without prejudice. The judge has yet to rule on that motion.
