The Securities and Exchange Commission (SEC) renewed its claim against LBRY in a filing dated May 12. It has now asked the US District Court of the District of New Hampshire to levy a $111,614 fine. This is due to the marketplace’s inability to pay the significant $22 million penalty which was imposed earlier.
LBRY is a decentralised platform powered by a blockchain-based file-sharing and payment network. It is primarily used to power social networks and video services. The case against the platform was their sale of unregistered security. The SEC had requested a permanent order prohibiting the sale of the tokens. It had also asked for disgorgement of all the money received plus interest and civil penalties. However, it did not claim fraud or charge any persons in the case. This filing was done in March 2021.
The earlier imposed fine was on the basis of the amount gained with the help of the unregistered tokens, LBRY Credits (LBC). The revised fine is due to a “lack of funds and near-defunct status.” The regulatory body has also asked the injunction to continue “at least until the Defendant destroys its LBC holdings and dissolves, as it stated to the Court it will do.”
Although LBRY did not hold an ICO or a similar public token sale, the SEC claimed that LBRY’s management kept tokens for themselves through a “pre-mine” method. After that, they sold them on secondary markets to generate revenue for their operations. LBRY CEO Jeremy Kauffman expressed fear that this ruling might jeopardise the whole US crypto business. This is by establishing a precedent that could categorise “almost every cryptocurrency” as security.
SEC has also claimed that the behaviour of LBRY selling these unregistered tokens was ‘recurrent’. The regulatory body has also claimed that “its violation included offers and sales specifically intended to affect or alter the trading markets for LBC.” This behaviour of LBRY has been happening for the last five years. It has continued even after the previous court filing. The commission has also withdrawn its request for Disgorgement.
This is coming at a time when the SEC is being harsh towards the crypto industry. Multiple notices and court filings have been issued by the regulatory body. There is also a significant lack of rules and regulations for the digital assets community. Multiple firms have decided to relocate outside of the U.S. to countries better suited for crypto. While the SEC is creating a hostile environment for the industry, this can be seen as a step forward in making a better environment for crypto.
