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The Securities and Exchange Commission (SEC) is shutting down its office behind the failed lawsuit against crypto firm Debt Box.
Its Salt Lake City office was accused of exerting "gross abuse of power" by a federal judge in its lawsuit against Debt Box, in which it alleged the platform defrauded investors of investors of at least $49 million.
The office will close after seeing "significant attrition" among its staff, according to the regulator. Michael Welsh and Joseph Watkins who served as lead attorneys on the case stepped down in April after the SEC informed them they would be terminated if they remained.
All current staff will be reassigned to existing SEC organizational components and operations will be shifted to the SEC’s Denver Regional Office.
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"The agency considered its budget and organizational efficiency in deciding to close the office, and it has no plans to close any other regional offices. All current staff will be aligned to existing SEC organizational components based on their current functions and agency mission needs," the SEC stated.
Robert Shelby, the federal district court judge in Salt Lake City, had initially froze Debt Box's assets and put the firm into receivership at the SEC's request.
However, Shelby then discovered that the regulator may have made “materially false and misleading representations.” Shelby went on to sanction the regulator for “gross abuse of the power entrusted to it by Congress” and ordered the SEC to pay some of DEBT Box’s attorney’s fees.
The judge faulted Welsh's arguments and Watkins' evidence. Welsh told the judge that DEBT Box was closing bank accounts and transferring assets overseas - a claim which turned out to be false. An SEC investigator blamed the mistake on a miscommunication, leading to an apology from Welsh.
SEC enforcement chief Gurbir Grewal apologised for the agency's conduct and said new attorneys will be appointed to the case with mandated training.
Last month, Shelby ruled that the regulator must pay $1.8 million in legal fees after dismissing the SEC's case against the crypto firm without prejudice.
“In this Order, the court ensures the final amount of fees requested by Defendants and the Receiver is reasonable,” the filing said.
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In another filing, the judge stated, “The Commission argues dismissal without prejudice is appropriate because it will protect investors and the public interest, and will not cause Defendants legal prejudice.”
