The SEC Is No Longer an Independent Agency

For more than 90 years, the Securities and Exchange Commission stood as one of the nation’s most consequential independent regulatory agencies. For lawyers committed to the Rule of Law, the SEC provided a case study in why independence matters. Until recently.

Last month the SEC dropped civil cases against three convicted felons, all found by federal juries to have cheated investors out of millions of dollars, and all winning pardons or clemency from President Trump in their criminal cases. Presidential pardons have no legal effect on SEC civil enforcement actions. By deferring to the administration in dismissing its civil cases, the Commission abdicated its responsibilities to investors by denying them the possibility of restitution the law says they deserved and thereby allowing guilty men to avoid punishment. It also showed the world that the SEC is no longer an independent agency.

While the executive and legislative branches of government have always exercised some control over the Commission – approving its budget, enacting legislation, appointing and confirming Commissioners, and setting priorities – it previously would have been inconceivable for the president or any other politician to directly influence the resolution of an SEC enforcement proceeding. That is no longer the case.

The effectiveness of the Commission’s Enforcement Division depends not only on its technical expertise but also on its independence from political pressure. Stable financial markets demand prosecutorial decisions based on evidence, statutory mandates, and legal principles—and not the type of political calculations that led to the dismissal of SEC civil cases against Devon Archer, Trevor Milton, and Carlos Watson.

Devon Archer. In 2018, a Manhattan federal jury found Archer guilty of conspiring with other promoters to defraud the Oglala Sioux Tribe by lying about $60 million in bonds sold to unsuspecting investors and using proceeds to benefit themselves. Archer was sentenced to a year in prison and ordered to pay more than $43 million in restitution to defrauded investors. The U.S. Supreme Court upheld the verdict in January 2024. 

In a related civil case brought by the SEC in 2016, the Commission charged that Archer and others had misappropriated funds from the tribal bonds and diverted them for luxury purchases and for other ventures in which the defendants had an interest. The SEC complaint sought civil penalties and disgorgement of ill-gotten gains, which would be used for restitution to the defrauded investors. The Commission also sought to bar Archer from serving as an officer and director of a public company.  

On March 25, 2025, before Archer had served any of his prison sentence or paid any restitution, President Trump granted him a full pardon of his criminal conviction. The pardon came after Archer testified in a Republican-led inquiry involving his former business partner, Hunter Biden, and the Biden family’s business dealings. Six months later, on September 16, the SEC dropped its civil case against Archer, stating to the court that “in the exercise of its discretion, it believe[s] that the dismissal [was] appropriate.”

Trevor Milton. In October 2022, a federal jury in Manhattan convicted Milton, the founder, executive chairman, and chief executive officer of Nikola Corporation, of three counts of fraud for repeatedly lying to investors about his company’s technology and business.  As the U.S. Attorney for the Southern District of New York stated: “Trevor Milton lied to investors again and again—on social media, on television, on podcasts, and in print, but today’s sentence should be a warning to start-up founders and corporate executives everywhere—‘fake it till you make it’ is not an excuse for fraud, and if you mislead your investors, you will pay the price.”

Milton was sentenced to four years in prison, ordered to pay a $1 million fine and return certain property in Utah. During Milton’s appeal, while he was free on bond, President Trump pardoned him, claiming that Milton had been targeted for his political support of Trump. Milton never served any time in prison. Notably, in October 2024, just weeks before the presidential election, Milton and his wife donated more than $1.8 million to Trump’s campaign and related committees, according to Federal Election Commission filings. 

The pardon, which erased Milton’s criminal conviction and its penalties, was followed on September 10 by the SEC’s dismissal of its case against him, which sought disgorgement and civil penalties. Once again, the Commission’s stated reason for the dismissal was that “in the exercise of its discretion, [the SEC] believe[d] the dismissal [was] appropriate.” The pardon and dismissal of the SEC case did not, however, eliminate Milton’s obligation to pay a $168 million arbitration award to Nikola to reimburse the company for its SEC fine. 

Carlos Watson. In July 2024, a federal jury in Brooklyn, New York convicted Watson, the founder and chief executive officer of Ozy, of conspiracy to commit securities fraud and wire fraud, plus aggravated identity theft. The charges stemmed from a years-long scheme to defraud Ozy investors by lying about the company’s financial performance, contracts, and acquisition prospects. The trial highlighted a key incident where Ozy’s former chief operating officer impersonated a YouTube executive during a 2021 call with bankers. Watson was accused of instructing the COO during the scheme. 

In December 2024, a federal judge sentenced Watson to 116 months in prison and ordered Watson and Ozy to pay $96 million in restitution to investors. On March 28, 2025, mere hours before Watson was set to surrender himself to federal custody, President Trump granted him clemency, commuting his sentence and nullifying the court’s restitution and forfeiture orders. According to Reuters and other news media, Watson cultivated allies of the President, including White House pardon czar Alice Marie Johnson, while casting himself as a victim of “selective prosecution.” On September 12, the Commission sought dismissal of its civil enforcement case against Watson, once again stating that it was doing so “in the exercise of its discretion.”

(It bears mentioning that the SEC also dismissed its enforcement action against Mark Kuhrt, the former controller of Stanford Financial Group who had been convicted in 2012 of helping to conceal Allen Stanford’s Ponzi scheme; the Commission’s dismissal followed the 2024 commutation of Kuhrt’s sentence by then-President Biden. However, unlike Archer, Milton, and Watson, none of whom served any time and all of whom faced hefty restitution obligations, Kuhrt had, at the time of his commutation, served a significant portion of his sentence, faced only a $1,000 penalty, and was required to pay no restitution. Additionally, the SEC’s case, filed in June 2009, had languished with no action on it for over a decade.)  

It strains credulity to explain these three dismissals as being based on prosecutorial discretion and not political pressure. If the SEC is viewed as beholden to the political whims of the president and allows large donors and other well-connected people to avoid civil prosecution for securities fraud in cases where investors lost millions of dollars, it is difficult to imagine how the Commission can continue to fulfill its mission: maintaining fair and efficient markets, protecting investors, and facilitating capital formation.

In addition, the dismissal of the SEC’s civil enforcement actions against the three convicted felons means that these men will not be required by the government to make their victims whole. They will also not be required to pay any additional civil penalties to the government, nor will they face restrictions that the SEC had sought on their ability to work in securities-related positions. 

For decades, the United States has had the most vibrant and transparent capital markets in the world. With a compromised Securities and Exchange Commission, which apparently now takes a transactional view towards the Rule of Law, it is doubtful that our capital markets will maintain that reputation.