SEC Closes Utah Office Following DEBT Box Case Rap

June 9, 2024

The decision to shutter the SLRO, the smallest of the SEC’s 11 regional offices, comes after a comprehensive review of the agency’s budget and organizational efficiency. The move will streamline the SEC’s operations, consolidating its regional presence from 11 offices to 10. The current staff of the SLRO will be repositioned to existing SEC offices across the state, ensuring their expertise continues to support the agency’s mission.

“The SLRO has long been the SEC’s smallest regional office and recently has experienced significant attrition,” the regulator said in a statement. “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.”

The enforcement jurisdiction over the state of Utah will be transferred to the SEC’s Denver Regional Office. This transition is expected to be seamless, as the SEC’s National Exam Program had already shifted SLRO’s local jurisdiction to Denver many years ago, meaning regional examinations authority will remain unaffected.

The closure of the SLRO is noteworthy in light of the recent DEBT Box case, where a federal judge not only dismissed the SEC’s charges but also sharply criticized the conduct of SEC lawyers Michael Welsh and Joseph Watkins, who resigned in April following sanctions for committing a “gross abuse of power” in their handling of the case. 

The judge accused the SEC of “bad faith” and “abusive litigation tactics,” further tarnishing the reputation of the already beleaguered office. Earlier this month, the judge ordered the SEC to pay DEBT Box $1.8 million in legal fees–over $1 million in attorneys’ fees and approximately $750,000 in receivership fees. The judge’s ruling emphasized that the SEC’s actions were an overreach and a significant misuse of its regulatory authority, further solidifying the court’s stance against such misconduct.

Prior to the judge’s decision, the SEC outlined its financial requirements in a comprehensive 148-page Congressional Budget Justification dated March 11. The agency proposed a budget of $2.59 billion for fiscal year 2025, representing an increase of over 6% compared to the $2.44 billion requested for 2024.

“Technology is rapidly transforming our markets and business models,” SEC Chair Gary Gensler said in the document. “There has been a dynamic change in communications to and among investors, from Reddit forums to celebrity influencers. Further, we’ve seen the Wild West of the crypto markets, rife with noncompliance, where investors have put hard-earned assets at risk in a highly speculative asset class.”

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