SEC Lowers LBRY’s Fine Significantly Due to Financial Constraints and Near-Defunct Status
- The SEC has revised LBRY’s fine to $111,614, acknowledging the company’s financial limitations and near-defunct status.
- In addition to the reduced fine, the SEC has requested an injunction to prevent LBRY from engaging in future unregistered offerings of crypto asset securities.
- LBRY had expressed concerns about its future viability in December 2022, stating that mounting legal and SEC debts could lead to its demise.
The United States Securities and Exchange Commission (SEC) has made a significant revision to the fine imposed on LBRY, a decentralized content platform. Recognizing LBRY’s financial limitations and near-defunct status, the regulatory body has lowered the penalty from $22 million to just $111,614. This decision highlights the SEC’s attempt to strike a balance between deterrence and the company’s ability to meet the original financial demand. Additionally, the SEC has sought an injunction to prevent LBRY from engaging in future unregistered offerings of crypto asset securities.
Revised Fine Reflecting Financial Constraints
In a recent filing to the New Hampshire District Court on May 12, the SEC expressed its intention to amend the initial plea for remedies against LBRY. The regulatory body acknowledged LBRY’s current financial position, including its lack of finances and near-defunct status, as a key factor in the decision to reduce the fine. The revised penalty of $111,614 reflects LBRY’s limited capacity to fulfill the original payment of $22 million.
Millions of dollars spent for a fine of $111,614.00 and a company financially ruined. That helps the world. https://t.co/GhvCS0Az7s— bill morgan (@Belisarius2020) May 12, 2023
The injunction to Prevent Unregistered Offerings
Alongside the revised fine, the SEC has also requested an injunction to prohibit LBRY from engaging in future unregistered offerings of crypto asset securities. This move aims to address concerns over potential violations of Section 5 of the Securities Act of 1933, which prohibits unregistered offerings. The regulatory body acknowledges LBRY’s claims of being defunct, ceasing operations, and lacking the resources to pay a larger fine. It emphasizes that a defendant’s ability to pay is a significant factor in determining the appropriate civil penalty.
Background and Legal Battle
The SEC initiated a civil suit against LBRY in March 2021, accusing the company of conducting unregistered securities offerings through its LBRY Credit token (LBC) sales. The case concluded in November 2022, with the presiding judge ruling that LBC should indeed be classified as a security. LBRY, however, contested the SEC’s original request for $22 million in disgorgement, deeming the amount unreasonable and failing to account for legitimate business expenses. The company criticized the SEC’s calculations, asserting that they were based on rough estimates and lacked support from available records.
LBRY’s Future Viability
By December 2022, LBRY had already expressed concerns about its future viability, citing mounting legal and SEC debts that could potentially lead to its demise. The company’s financial limitations and near-defunct status played a crucial role in the SEC’s decision to lower the fine and seek an injunction. LBRY’s ability to meet the requirements of the injunction, including disposing of its LBC holdings and dissolving the company, will be closely monitored.
The SEC’s decision to significantly reduce LBRY’s fine and request an injunction demonstrates its recognition of the company’s financial limitations and near-defunct status. The revised penalty of $111,614 aligns with LBRY’s current financial capacity, while the injunction seeks to prevent future unregistered offerings of crypto asset securities. LBRY’s future viability remains uncertain as it navigates the regulatory landscape and strives to meet the SEC’s requirements.