Key Takeaways
- SEC stated the smaller penalty was a compromise between “the need to balance the deterrence from a penalty with LBRY’s inability to pay.”
- LBRY is “defunct, ceasing operations, and without the funds to pay a larger fine,” the SEC said in the filing
The Securities and Exchange Commission (SEC) is looking to amend its $22 million punishment against decentralized content platform LBRY after acknowledging that the company cannot pay the penalty.
The SEC filed a request for remedies amendment in a New Hampshire District Court on May 12, proposing a fine of $111,614 instead of the initial $22 million. LBRY is “defunct, ceasing operations, and without the funds to pay a larger fine,” the SEC said in the filing, adding that “a defendant’s ability to pay is a factor when imposing a civil penalty.”
In March 2021, the SEC filed a civil suit against LBRY, alleging that the company’s sale of its token LBRY Credits (LBC) was an unregistered securities offering. It also requested that the court halt any future LBC sales. In November 2022, the SEC won the case, and the judge ruled that LBC was security.
In December, LBRY claimed that the SEC’s demand for $22 million was unreasonable since it was “vastly” overstated and did not consider the company’s legitimate business expenses.
LBRY claimed that the SEC’s calculations were “based on rough, back-of-the-envelope math” and that the sum it sought was “simply not supported by the record.” However, the company stated in December 2022 that it would likely be “dead in the near future” due to its SEC debts and legal battles.
The SEC’s request for a smaller penalty was a compromise between “the need to balance the deterrence from a penalty with LBRY’s inability to pay,” the agency said. The SEC also asked the court to stop LBRY from conducting future unregistered offerings of crypto asset securities. While this may be a relief for LBRY, it is uncertain whether the company can recover from its near-defunct status or revive its operations.
The latest move by SEC comes amid the agency increasingly cracking down on crypto firms for allegedly offering unregistered securities. Last month, SEC filed charges against crypto exchange Bittrex alleging the platform failed to register as a broker-dealer, exchange, and clearing agency,
Earlier this year, crypto exchange Kraken was forced to end its crypto staking-as-a-service platform for U.S. customers and pay $30 million to settle SEC charges it offered unregistered securities.
