TLDR
- The SEC is closing its Salt Lake Regional Office in 2024 due to significant staff attrition and financial penalties ordered by a judge.
- The closure stems from the SEC’s failed lawsuit against DEBT Box, alleging a $50 million crypto fraud scheme.
- A federal judge dismissed the case, found the SEC acted in “bad faith,” and ordered it to pay DEBT Box $1.8 million in legal fees.
- Two SEC lawyers from the Salt Lake office resigned after being sanctioned for “gross abuse of power” in the DEBT Box case.
- The SEC’s Denver office will take over the Salt Lake office’s responsibilities to ensure ongoing regulatory work.
The U.S. Securities and Exchange Commission (SEC) has announced plans to close its Salt Lake Regional Office in 2024, a move directly tied to the agency’s failed legal pursuit against a Utah-based crypto firm and subsequent financial penalties.
The SEC’s civil lawsuit against Digital Licensing, doing business as DEBT Box, alleged the company perpetrated an illegal $50 million cryptocurrency scheme.
However, the case took a dramatic turn in March when Judge Robert Shelby found the SEC had “engaged in bad faith conduct” over a temporary restraining order to freeze DEBT Box’s assets.
Citing the SEC’s “gross misuse of power,” Judge Shelby dismissed the lawsuit and ordered sanctions against the regulator.
The SEC must now cover approximately $1 million in attorney fees and costs, plus $750,000 for receiver fees and expenses incurred by DEBT Box due to the “improvidently entered ex parte relief.”
The financial blow dealt by Judge Shelby’s ruling appears to be a driving force behind the Salt Lake office’s closure.
In a June 4 notice, the SEC cited “significant attrition” at the office as the primary reason for shuttering operations and shifting responsibilities to its Denver regional hub.
🚀 We have some fantastic news to share with our D.E.B.T. Box community today!
The U.S. District Court for the District of Utah has officially dismissed the SEC's case against us without prejudice. This means the case is closed, and any future action by the SEC would have to go… pic.twitter.com/aGiNVxMYbz
— D.E.B.T. (@TheDebtBox) May 28, 2024
Two SEC lawyers based in Salt Lake City, Michael Welsh and Joseph Watkins, resigned in April after being reprimanded for their conduct in the DEBT Box case.
Their departures likely contributed to the attrition referenced by the SEC, though the agency did not explicitly link the resignations to the closure decision.
The SEC’s handling of the DEBT Box matter drew sharp criticism from industry participants and lawmakers.
Miguel Francis-Santiago, DEBT Box’s chief marketing officer, suggested the Salt Lake office’s closure was a direct response to the “gross misuse of power” exhibited by SEC staff involved in the failed lawsuit.
Coinbase’s Chief Legal Officer Paul Grewal also weighed in, slamming the SEC on social media and implying the term “attrition” may downplay the significance of the agency’s missteps in the DEBT Box saga.
Despite this high-profile setback, the SEC maintains an aggressive stance on cryptocurrency regulation. The commission currently has ongoing enforcement actions against several major crypto firms, including Coinbase, Binance, Kraken, and Ripple.
In May, lawyers for Terraform Labs and its co-founder Do Kwon announced reaching an in-principle settlement with the SEC, signaling the agency’s willingness to pursue compromises in certain cases while maintaining a firm regulatory grip on the digital asset market.
The Salt Lake Regional Office closure underscores the potential consequences faced by government agencies engaged in overreach or misconduct, even as the SEC’s broader crypto oversight efforts remain unwavering.
