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Identifying the platform’s inability to pay a massive sum of $22 million as penalty in violations of the securities laws, the SEC has revised the penalty to $111,000.
In a major development and probably the first, the US Securities and Exchange Commission (SEC) has decided to revise its fine against blockchain-based content-sharing platform LBRY, having identified the platform’s inability to pay a massive sum of $22 million.
As per the filing submitted last week on May 12 in a New Hampshire District Court, the securities regulator sought an amendment to its request for remedies in a case against LBRY. Considering LBRY’s “lack of funds and near-defunct status”, SEC has chosen to withdraw its request for disgorgement, or forfeiture of ill-gotten gains. As per the filing, the securities regulator is now seeking a revised fine of $111,000.
Two years back in March 2021, the US SEC had filed a lawsuit against LBRY while accusing them of offering LBRY Credit tokens (LBC) as unregistered securities and thus violating the federal securities laws. Back then, LBRY CEO Jeremy Kauffman expressed concerns over SEC’s decision stating that this could become a precedence in the long term and will classify almost every cryptocurrency as security.
Despite the fact that LBRY didn’t conduct an initial coin offering (ICO) or any kind of public token sale, the SEC alleged that LBRY’s team used a “pre-mine” process to retain the token to themselves and later released them on secondary exchanges to generate funds for their operations.
The SEC vs LBRY
Through a summary judgment back in November 2022, the SEC secured a win wherein the federal judge ruled that the tokens incentivized LBRY’s team for developing the network while creating the perception among investors that they could secure profits by investing in LBC in the secondary market.
The SEC had argued that LBRY’s possession of the LBC tokens hints at the potential of additional unregistered sales, which supports the necessity of an injunction. “LBRY satisfies the factors for injunctive relief and there is a reasonable likelihood it will violate Section 5 again,” the agency said.
Later in December, LBRY hit back to the SEC’s request of paying $22 million in disgorgement. LBRY stated that “the amount was not a reasonable approximation of profits causally connected to the violation”. In December 2022, LBRY contended that an injunction is unnecessary since they are already in the process of shutting down the operations and burning existing LBC tokens.