SEC Seeks Reduced Penalty Of $111,614 For LBRY
The US Securities and Exchange Commission (SEC) has taken steps to revise the $22 million penalty imposed on decentralized content platform LBRY. Acknowledging LBRY’s limited capacity to pay the fine, the SEC submitted a request to the New Hampshire District Court on May 12, proposing a reduced penalty of $111,614.
The US Securities and Exchange Commission (SEC) is pursuing a revision of its $22 million penalty imposed on the decentralized content platform LBRYhttps://t.co/UlpzoalxX2
— crypto.news (@itscrypto_news) May 15, 2023
LBRY’s Financial Constraints
The SEC cited LBRY’s near-defunct status and lack of funds as the basis for the revision, acknowledging the defendant’s financial constraints as a factor in determining civil penalties. Alongside the reduced fine, the SEC also requested that LBRY be prohibited from conducting future unregistered offerings of crypto asset securities.
The SEC had initially filed a civil lawsuit against LBRY in March 2021, alleging that the unregistered sales of LBRY Credits (LBC) constituted securities offerings. The commission sought disgorgement of $22 million in alleged gains from LBC token sales, along with an injunction to halt any further LBC sales by LBRY.
In November 2022, the SEC emerged victorious in the case when the presiding judge ruled that LBC qualified as a security. The proposed reduction in the penalty by the SEC aims to strike a balance between the need for deterrence and LBRY’s financial constraints.
Calculation Methodology Under Fire
LBRY had previously argued that the SEC’s initial $22 million demand was excessive and failed to consider reasonable operational costs associated with their business. The platform criticized the SEC’s calculation methodology, asserting that the requested amount lacked proper evidential support.
LBRY has expressed concerns about its viability, warning that mounting legal and SEC debts could lead to financial ruin. These concerns were raised shortly after the SEC’s legal victory in November 2022, suggesting a challenging outlook for LBRY’s prospects.
As the SEC pursues a revision of the penalty against LBRY, the outcome of this ongoing legal battle holds significant implications for the decentralized content platform and the wider crypto industry. Market participants will closely monitor the resolution of this case, which will likely shape the regulatory landscape for similar projects and their compliance with securities laws.
