SEC Sues Blockchain Startup LBRY for Selling Unregistered Securities
Like the U.S Securities and Exchange Commission (SEC) did with Ripple, the commission has sued crypto firm LBRY to court for selling unregistered securities. LBRY Inc, a blockchain-based file-sharing platform, has been charged by the SEC for conducting an $11 million unregistered security offering.
SEC Sues LBRY
Founded in 2015, LBRY operates a decentralized content publishing platform. The first sales of its native token (LBRY Credits) began in 2016.
According to the SEC, before LBRY developed its network, it sold the tokens as investment contracts from July 2016 to February 2021 to numerous investors, assuming that their value would go up.
The Commission alleged that the company had failed to file a registration statement for the offering. As such, the SEC said that the offering “failed to satisfy any exemption from registration.”
LBRY allegedly received more than $11 million from the token sale in USD, BTC, and other types of cryptocurrency assets from purchasers who participated in its offering.
On this basis, the SEC charged LBRY for unregistered sale of securities in violation of the registration provisions of Sections 5(a) and 5(c) of the Securities Act of 1933. The regulator further stated that it seeks a permanent injunction against LBRY and its employees, as well as civil penalties and disgorgement.
LBRY Fires Back
LBRY has gone ahead to issue its response telling its side of the story through a newly launched website called “Help LBRY save crypto.”
There, the company claimed that the SEC’s allegations are “a tremendous threat to the entire crypto industry.
In the statement, the blockchain firm reassured its users and asked for calm. It said since LBRY is a decentralized network, all protocols, apps, channels, content, and token holdings are not at risk.
Making a distinction between LBRY Inc and the LBRY network, the company stated;
“Even if LBRY Inc is shut down by the SEC as a result of this lawsuit, the LBRY network will continue to function and grow through the effort of the distributed LBRY community.”.
The firm said it had anticipated a similar development, as the SEC has investigated the matter for at least three years. LBRY also said they had tried to reach an agreement with the SEC but wasn’t successful.
LBRY refuted the SEC’s claims as its token “serves an integral function in our network. It allows individuals to create an identity, tip creators, and publish, purchase, and boost content in a decentralized way.” In contrast, the Commission said that LBRY Credits are used only for speculation.
LBRY will be represented by law firm Perkins Coie and attorneys Keith Miller and Adam Schuman.
Back in December, the SEC went after blockchain company Ripple and some of its executives for a similar violation. In that case, though, the Commission alleged the payment processor for conducting unregistered security offering for over $1 billion.
Ripple is still in legal proceedings with the regulator.