SEC Lawyers Have One Week Left to Explain Their “False and Misleading” Evidence

SEC Lawyers have been ordered to file a response explaining why they seemingly intentionally brought “false and misleading” evidence to court.

These lawyers petitioned over the summer for a Temporary Restraining Order against DEBT Box, a Wyoming-based crypto firm. In this TRO Application, Commission attorney Michael Welsh explained that DEBT began closing its bank accounts in the United States in order to escape the jurisdiction of the SEC. This explanation convinced the court to issue the TRO in June and repeatedly renew it until October.

With further inspection, however, the court began to doubt the veracity of Welsh’s evidence, eventually labelling them misrepresentations (see page 14 of the court proceedings). Another attorney along with two investigative staff were present during these statements but did not correct Welsh’s evidence, which creates some wonderings for those watching the trial. Were the other attorney and investigative staff not paying attention while Welsh spoke? Or are these kinds of misrepresentations common enough that they didn’t feel the need to comment on them?

The news comes as a major breach of trust between the agency and the investment professionals it seeks to protect. Promoting fairness (as the SEC’s website touts as one its core goals) cannot come from an agency that, if given the benefit of the doubt, relies on factually scarce information when creating its claims.

SEC Lawyers have been tasked with submitting a Commission’s Response that asks them to explain what factual support they relied on when making certain misleading statements in court. The response is due on December 14 and the SEC has said they will “respond to the Court as directed.”

Alternate link to court proceedings: https://storage.courtlistener.com/recap/gov.uscourts.utd.141167/gov.uscourts.utd.141167.215.0.pdf