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SEC Pulls Out of Salt Lake City After Disastrous Crypto Lawsuit Leads to $1.8 Million Fine, Citing ‘Significant Attrition’
Last week’s Consensus crypto conference in Austin was billed as a triumphant celebration of the budding bull market, but in reality it felt like a long campaign gloating over the blockchain industry’s recent victories in Washington At CoinCenter’s annual dinner, the think tank libertarian-minded invited House Majority Whip and crypto crusader Tom Emmer (R-Minn.) to toast. “Gary Gensler sucks,” he shouted as he took the stage, to thunderous applause. (He later joked that he had strayed from his hosts’ prepared remarks.)
So are cryptocurrencies winners? It’s been hard not to feel that way in recent weeks, buoyed by legislative victories, the ETH ETF approvala further $75 million of corporate donations to a blockchain-focused super PAC and a surprising reaction to President Joe Biden’s decision to veto a congressional FU over a shaky SEC bulletin. Subtle wordsmith, Messari CEO and newfound Trump cheerleader Ryan Selkis declared on Twitter that the industry was officially at “war” with the Democratic Party.
The cryptocurrency army may have won its first battle, and against its most despised general at that. In a press release released Late Tuesday, the SEC announced it would close its Salt Lake regional office by the end of the year, citing “significant attrition.” For careful observers, Salt Lake City is the branch that gave rise to the agency unfortunate cause against the cryptocurrency company Debt Box, a case that the blockchain industry has since seen as emblematic of Gensler’s dominance.
The lawsuit was an absolute embarrassment to the agency, which otherwise did marked court victories against crypto companies in recent months. After SEC lawyers filed an enforcement action against the Utah-based company last summer, they asked the judge for a restraining order and asset freeze through an ex parte motion, meaning the company would not would have been informed, claiming that its leaders were a flight risk.
A series of documents revealed that the SEC actually had no evidence that the company was attempting to flee the country, but instead muddled and confabulated the evidence. The judge called it a “serious abuse of power,” taking the unprecedented step of sanctioning the agency put in order will have to pay $1.8 million in legal fees. Two SEC lawyers are leading the case he resigned after being told they would be fired.
Yesterday’s press release appears to be the SEC’s final surrender, even though the announcement fails to mention the doomed cryptocurrency lawsuit. Attrition has been a persistent problem during Gensler’s tenure, as I reported in my profile of the controversial chair last year. Some former lawyers I spoke with cited his aggressive approach to litigation as a source of stress.
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However, those celebrating an early victory may want to repop those bottles of champagne. With a myriad of lawsuits still ongoing in the courts, the cryptocurrency industry “war” has just begun.
Leo Schwartz
leo.schwartz@fortune.com
@leomschwartz
This story was originally featured on Fortune.com