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Following a legal dispute, the U.S. Securities and Exchange Commission (SEC) has revised its fine against LBRY from $22 million to just over $111,000.
SEC Vs. LBRY
The SEC has cited financial hardship on the part of the defendants as the reason for the significant reduction in the fine amount. The regulatory body brought the case against the blockchain-based content-sharing platform in March 2021, over allegations that the latter sold unregistered securities through its cryptocurrency, LBRY Credits (LBC). The SEC presented its usual argument that LBC constituted a security and should have been registered with the agency before being sold to investors.
LBRY had disputed the SEC's claims, arguing that LBC was not a security but a utility token that could be used to access and transact on the LBRY platform. The company also claimed that the SEC's enforcement action was an attempt to stifle innovation and harm small businesses.
In response to LBRY's arguments, the SEC sought a fine of $22 million and an injunction to prevent the company from selling LBC in the future.
LBRY Claims “Unreasonable” Fine
Following a months-long legal battle, in November 2022, the SEC emerged victorious, and the judge presiding over the case ruled that LBC was a security. Soon after, LBRY approached the SEC with a request to reduce the fine amount. The crypto company claimed that the $22 million fine was not reasonable, as it vastly overstated the scope of LBRY’s treasury and did not account for any of the company’s legitimate business expenses.
The agency has taken LBRY’s concern to heart and decided to revise the fine amount to a much-lower $111,614. In the latest filing, the SEC wrote,
“The Commission acknowledges LBRY’s representations that it is defunct, ceasing operations, and without the funds to pay a larger fine, and recognizes that a defendant’s ability to pay is a factor when imposing a civil penalty.”
SEC’s Increasing Crypto Obsession
The SEC's case against LBRY is just one example of the agency's increasing scrutiny of the cryptocurrency and blockchain industries. Industry experts have also questioned the reasoning behind the SEC’s actions which cost millions of dollars in legal fees and hit a financial blow to the company for a mere fine of $111K. However, it is becoming clear that as these industries continue to grow and evolve, it is likely that the SEC and other regulatory bodies will become even more involved in regulating them.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.