A federal court found that the SEC's violations constituted a 'gross abuse of power'. As a result, the SEC was sanctioned.
In response, two SEC prosecutors resigned, as Bloomberg reported.
It has come to light that lawyers Michael Welsh and Joseph Watkins were forced to resign after being warned that they would be fired if they stayed.
These lawyers were the lead attorneys in the case against Digital Licensing Inc.'s DEBT Box crypto platform.
Federal Judge Robert Shelby, in the SEC's case against DEBT Box, accused the lawyers of making false statements and misrepresenting the truth in the absence of evidence.
The court finally sanctioned the regulator in March, and the SEC chairman apologized for the mistakes and abuses.
The SEC has not commented on the news of the lawyers' dismissal.
The SEC's case against DEBT Box involved allegations of at least $49 million in investor fraud. A judge froze the company's assets but reversed the decision when it appeared that the SEC may have made "materially false and misleading statements."
The court sanctioned the SEC for "gross abuse of the authority granted to it by Congress" and ordered the agency to pay a portion of DEBT Box's legal fees.
The decision highlights the SEC's approach to regulating the crypto industry under Chairman Gary Gensler, particularly through an enforcement strategy that many experts argue has increased uncertainty and stifled innovation in the digital asset space.
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