The Securities and Exchange Commission (SEC) recently requested a court to reduce a $22 million penalty levied against decentralized publishing platform LBRY, acknowledging that the firm may not be able to afford the multi-million dollar punishment. The financial watchdog is now proposing a lower penalty of $111,614, citing that LBRY is “defunct, ceasing operations, and without the funds to pay a larger fine.” Moreover, the SEC has withdrawn its request for disgorgement, stating that LBRY does not need to repay any ill-gotten gains.
LBRY CEO Jeremy Kauffman views the agency’s decision as purely self-interest, rather than a change-of-heart. He believes the SEC feared losing the case and wanted to avoid setting a bad precedent. Regardless of the outcome, Kauffman sees a bright future for Odysee, LBRY’s subsidiary. However, he maintains that the blockchain-based media platform is still under threat from the SEC, accusing the agency of acting arbitrarily and hostilely toward all blockchain firms.
The SEC won its case against LBRY in November last year, charging the company with selling unregistered securities in March 2021. The agency claimed that LBRY’s LBC tokens were sold as investment contracts and unregistered securities, alleging that the firm received $12.2 million in proceeds from the sale of LBC between July 2016 and February 2021. Although the regulator concedes that the multi-million dollar penalty is no longer warranted, it maintains that the court should enjoin LBRY to prevent it from selling unregistered securities in the future.
LBRY has not acknowledged that its behavior was illegal and still has the capacity to sell LBC tokens, either directly or through Odysee. However, the company claims that Odysee is independently-run and distinct from LBRY, adding that the subsidiary has never been involved in the sale of LBC tokens. The SEC is urging the court to pressure LBRY until it fully dissolves or burns its holdings of LBC, removing the tokens from circulation permanently.
The legal battle between LBRY and the SEC could have a lasting impact on the crypto industry. The company warned in November that the case’s ruling sets an “extraordinarily dangerous precedent,” potentially making every cryptocurrency in the US, including Ethereum, a security. Furthermore, Kauffman has criticized the SEC’s regulatory approach toward digital assets, predicting it will cause damage to the crypto industry in the United States.
Source: Decrypt
