Original post here: https://x.com/NuclearHerbs/status/1788326597420064981
OK, so it’s not a #PulseChainLawSchool class, but consider it a basic ethics seminar. I’ll use the SEC as an example of what not to do.
I’m basically stuck sitting around doing nothing for the time being, and I knocked a bunch of important personal shit off my to-do list, so I figured I’d deep dive into the Debt Box fiasco a little more. You remember the order from the Judge that expressed his displeasure at the way the SEC acted throughout the case, right? If not:
I mean, when you say something like this, you’re clearly unhappy:
“For the reasons provided, the court concludes the Commission engaged in bad faith conduct in seeking, obtaining, and defending the ex parte TRO, asset freeze, and appointment of a receiver. The court imposes sanctions under its inherent authority for the Commission’s abuse of judicial process.”
Subsequently, two SEC attorneys resigned, reportedly after having been told they’d be fired if they didn’t:
But just how many SEC attorneys were involved in Debt Box? Let’s count them up. You can look at their notices of appearance throughout the docket here:
https://courtlistener.com/docket/67660309/securities-and-exchange-commission-v-digital-licensing/…
The earliest dates that I could find of their being admitted to practice law anywhere are in parenthesis. It could be wrong, because some bar associations make it easy to find, some don’t let you know if they were admitted somewhere else previously.
Michael E. Welsh (2015) – Resigned April 2024
Casey R. Fronk (2009)
Troy Flake (2009)
Tracy S Combs – (2014) Regional Director of the SEC’s SLC office
Elizabeth McFadden (1993)
Melinda Hardy (1992)
Michael S. Bailey (2008)
Nicholas P. Heinke – Asst Regional Director, SEC’s Denver office (2007)
Gregory A. Kasper – (2013)
Terry Miller (2007)
The following attorneys at the SEC provided affidavits at Docket Entry 233 of the Debt Box case, saying in essence “Sorry Judge, totally didn’t mean to mislead the court or anything.” Over 200 combined years of practice here, and it includes the former AG of New Jersey.
Michael Welsh (2015)
Joseph Watkins – (2018) Lead Investigative Attorney in Debt Box – Resigned April 2024
Laurie Abbott (2013)
Tracy Combs – (2014) Regional Director of the SEC’ SLC office
Gurbir Grewal – SEC Division Director of Enforcement, and former Attorney General of New Jersey. (Self described as “I am a Senior Officer of the SEC and am responsible for overseeing the work of the Division, which includes investigating and litigating securities actions on behalf of the SEC in federal court. I report directly to Gary Gensler, the SEC Chair.”) Read his bio for yourself: https://en.wikipedia.org/wiki/Gurbir_Grewal…
That’s the wind-up, here’s the fastball. There were at least 12 Attorneys involved, including one guy who “report[s] directly to Gary Gensler,” a Regional Director, an Assistant Regional Director, and some people who have been practicing since before AOL was sending out CDs you used to sign up for dial-up internet.
Out of that, exactly two attorneys with a combined 15 years of experience were sacrificed in order to placate the masses. No part of the SEC’s leadership group (i.e. directors/asst directors, etc) were forced out after this debacle. I just note that it’s unlikely a cashier at McDonalds would keep their job after lying to their manager as much as the SEC lied to the Court. Yet here we are.
To hammer this home, SEC attorney Laurie Abbott was specifically called out by the Judge on page 45 of his ruling for recognizing a statement Welsh made at a hearing (she was there) “did not accurately reflect what she said or intended to convey” but “did not inform [Welsh] of the error…” so that he could let the Judge know. The court called her failure “deeply troubling” on page 46, yet somehow she’s still employed by the SEC.
But the judge wasn’t done with her either, as he stated on page 47:
“The Rules and Abbott’s duty of candor to the court do not leave to her to decide whether a false statement must be corrected. Welsh made a false statement to the court that was integral to the Commission’s showing of irreparable harm in a hearing for an ex parte TRO. Abbott knew it was incorrect the moment Welsh said it. Her duty required her to correct it.”
He went on, in far more detail, but you can read it for yourself.
The judge summed it up nicely on pages 73 and 74 as follows:
“The Commission’s above-discussed conduct constitutes a gross abuse of the power entrusted to it by Congress and substantially undermined the integrity of these proceedings and the judicial process.”
And because the Judge wasn’t done, he said:
“As required and discussed in detail above, the court finds subjective bad faith by the Commission. The court determines by “clear evidence” there was both a “complete lack of color and an improper purpose on the part of the government.”
Normies don’t know this, but “bad faith” isn’t tossed around lightly by Judges. It’s not the opposite of good faith, which is used all the time. Bad faith is so far on the outer edge of the spectrum that it’s very rarely used by Judges ruling on matters.
He went on, though:
“The critical evidence the Commission offered to obtain and defend the ex parte TRO lacked any basis in fact, yet the Commission nonetheless advanced that evidence in deliberately false and misleading ways. Further, this was done for an improper purpose—to appropriate and abuse the power of the court to impose extraordinary relief upon Defendants, relief the Commission would not have been entitled to had it been candid with the court. The Commission’s bad faith conduct in misappropriating the power of the court “undermines the confidence of both litigants and the public in the fairness of judicial proceedings . . . and impugn[s] the integrity of these proceedings.””
You know what else “undermines the confidence of both litigants and the public” with regards to SEC enforcement actions? The fact that a lot of the SEC’s senior staff, including the dude who reports directly to Gensler and an attorney present at the hearing and specifically called out by name by the Court, are still around and training the replacements for the two junior attorneys who were forced to resign.
Bottom line:
Don’t expect the SEC to fix itself. Don’t expect courts to rein in the SEC, because they likely won’t, at least not for the next few years.
Elect representatives who will get to work on legislation that will define the scope of the SEC’s jurisdiction over digital assets. I posted a list of some of your Senators and Representatives who are strongly opposed to crypto yesterday. Factor that into your vote this fall.
Finally, change who’s in the White House and historically the SEC chair resigns. Even if for whatever reason he doesn’t resign, his term is up while the next President is in office, which means that the next President will either continue this ridiculousness or appoint someone who isn’t looking to kill off an entire industry that the US should be leading.
In the meantime, be good to each other. We need to build PulseChain into something people want to come to, not be turned off by infighting. Nobody wants to go to a party that they know is just going to end up in a big fight.
