LBRY is in the SEC's crosshairs for allegedly selling unregistered securities. The firm claims that the case could set a precedent that would affect much of the sector.
March 31, 2021 | AtoZ Markets – Blockchain firm LBRY, Inc. has struck back at the Securities and Exchanges Commission (SEC), saying that a complaint filed against it threatens much of the crypto industry because it would define most tokens as securities.
The SEC has been investigating publishing platform based blockchain LBRY, Inc. as part of a three-year investigation that began in May 2018.
According to the complaint filed by the SEC, the platform is alleged to have sold unregistered securities through multiple avenues, including institutional investors and users of the platform between 2016 and 2020.
The regulator is seeking a permanent court order to prevent the company from selling more tokens, returning all funds received with interest, and paying an undisclosed amount in civil penalties.
LBRY developed a decentralized video sharing platform called Odysee that allows viewers to "earn crypto for watching videos" and creators to earn LBRY credits for their work. Since 2016, 13 million LBC tokens have been sold for $5 million in Bitcoin. A press release from the SEC states that the total amount raised was $11 million, including dollars and services from the buyers who participated in its offering.
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According to LBRY, although it did not conduct an initial coin offering (ICO) and the SEC does not allege fraud, its attempts to strike a deal have been rejected by the Commission:
“The SEC refused to offer any terms that would have made the token exchange viable for US citizens or that would allow LBRY Inc. to continue operating. We were willing to give them a pound of meat, but they were only interested in our head."
Despite having already spent "more than a million dollars in legal fees" and the momentous effort of "several thousand hours of team members" during the investigation, the company does not back down, stating: " The SEC is advancing an aggressive and disastrous new rule that would convert almost all blockchain tokens into securities."
"Classifying all actively developed blockchain tokens as securities will be a bureaucratic nightmare for residents of the United States and businesses operating in that country."
A petition on its website "helplbrysavecrypto.com" with more than 6,700 signatures to date asks "the SEC to drop this case and establish clear rules for the cryptocurrency industry in the United States."
LBRY claims that when he asked the SEC how he could operate legally, they told him that the regulatory body could not advise on this and could only say that they were breaking the law.
However, the company stated that if the SEC succeeds in shutting down LBRY, Inc. the LBRY platform and ecosystem will not be affected as it is fully decentralized with "hundreds of people on six continents", most of whom are not LBRY employees, contributing to the network in 2020.
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