People exit the headquarters of the U.S. Securities and Exchange Commission (SEC) in Washington, D.C.
People exit the headquarters of the U.S. Securities and Exchange Commission (SEC) in Washington, D.C. Reuters

KEY POINTS

  • The SEC said staffers will be aligned to existing units based on their current functions
  • Two lead lawyers in the SEC's dismissed case against Debt Box reportedly resigned in April
  • Judge Shelby blasted the SEC for the 'bad faith conduct' of some of its lawyers in the controversial case

The U.S. Securities and Exchange Commission (SEC) has announced that it will shut down its Salt Lake Regional Office (SLRO) later in 2024 after considering the regulatory agency's budget and efficiency.

The Wall Street regulator announced the SLRO's closure in a notice Tuesday, saying the office was the least-staffed, and all the employees of the branch will be aligned to existing SEC units based on their current functions.

One sentence from the notice seemingly refers to the SLRO's recent debacle following its highly controversial handling of the regulator's case against Digital Licensing, which operates under the business name Debt Box. "The SLRO has long been the SEC's smallest regional office and recently has experienced significant attrition," the notice stated.

Bloomberg reported in April that two SEC lawyers, Michael Welsh and Joseph Watkins, resigned from their posts. An SEC official informed the two lead lawyers in the agency's Debt Box case that they would be terminated if they didn't step down, the report revealed, citing people familiar with the matter. Welsh and Watkins were based in the SEC's SLRO.

It is unclear whether their resignations were associated with the "significant attrition" the SLRO supposedly experienced recently.

The SEC filed a lawsuit against Digital Licensing last year over the company's alleged securities laws violations, after which the regulator obtained a "temporary asset freeze, restraining order, and other emergency relief" against the crypto firm. U.S. Chief District Judge Robert Shelby discovered that some statements made by several SEC lawyers in the case were "false and misleading."

Just last week, Shelby dismissed the case and ordered the SEC to pay roughly $1.8 million in legal fees and related costs, saying the sanctions are "the result of bad faith conduct on the part of certain Commission attorneys."

The SEC noted that the SLRO's jurisdiction over Utah will be transitioned to the regulatory agency's Denver Regional Office.

News of the office's closure comes as the SEC is faced with increasing scrutiny not only from the cryptocurrency community but also among lawmakers who believe the regulator is committing regulatory overreach in its enforcement actions toward digital assets firms.

Among the political critics of the SEC under Chair Gary Gensler is Sen. Cynthia Lummis, R-Wyo., who said the regulator "persecuted" the crypto industry.

When the House of Representatives passed the Financial Innovation and Technology for the 21st Century Act (FIT21) last month, Republican members of the House Financial Services Committee said the crypto sector "has been mired by uncertainty and regulation by enforcement."

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