LBRY Inc, a decentralized publishing and sharing blockchain platform, found itself in hot water when the United States Securities and Exchange Commission began investigating the company in May 2018. After nearly three years, the SEC has filed a new complaint against LBRY alleging that it sold $11 million in unregistered securities. However, LBRY is not taking the complaint lying down.
In fact, LBRY alleges that, if validated, the complaint could threaten the cryptocurrency industry at large. This is because the conditions outlined in the complaint could imply that most crypto tokens are securities.
”The Whole Industry Is at Risk.”
“The SEC is advancing an aggressive and disastrous new standard that would make almost all blockchain tokens securities,” the company said on “helplbrysavecrypto.com,” a website that has seemingly been launched for the purpose of raising awareness around the legal battle. “Classifying all actively-developed blockchain tokens as securities will be a bureaucratic nightmare for United States residents and businesses operating in the US.”
LBRY is not the only party that is concerned about the SEC’s decision to file a complaint against LBRY. Jeremy Hogan, partner at Hogan & Hogan, linked the complaint against LBRY with the SEC’s filings against Ripple. “Ripple wasn’t the first and won’t be the last. The whole industry is at risk,” he said.
Just today the SEC filed another lawsuit against a crypto-currency company – LBRY, Inc. and the LBC coin. Ripple wasn't the first and won't be the last. The whole industry is at risk.https://t.co/6xxsCwl2E0
— Jeremy Hogan (@attorneyjeremy) March 30, 2021
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The SEC’s Allegations against LBRY
The SEC has accused LBRY of selling unregistered securities to retail and institutional investors, as well as LBRY platform users between 2016 and 2020. As such, the regulator is seeking a permanent injunction that would prevent the company from selling more tokens. The injunction would require disgorgement of funds that have been received with interest, and a civil penalty fine.
LBRY alleges that the SEC’s claims are unfounded and that the Commission is out for blood. So far, LBRY says, attempts to settle with the Commission have been rejected: “the SEC declined to offer any terms that would have made it viable for U.S. citizens to exchange tokens or to allow LBRY Inc to continue to operate,” the company said, cited by CoinTelegraph. “We were willing to give them a pound of flesh, but they were only interested in our head.”
Additionally, LBRY alleges that it approached the SEC to ask how it could operate within the confines of the law, the regulator gave a non-answer: that it could not advise on such matters. It only says that LBRY was breaking the law.
However, even if the SEC does succeed in shutting down LBRY, Inc., the LBRY platform and ecosystem will remain unaffected. This is because the decentralized platform is supported by ‘hundreds of people across six continents’, most of which are not employed by LBRY, Inc.
As regulators are paying increasingly close attention to the crypto industry, more analysts are speculating about grim possibilities. Earlier this week, Finance Magnates reported Ray Dalio’s statement that the United States government could take action to ban Bitcoin.