The SEC filed suit in 2022 alleging the blockchain-based file-sharing network had violated federal securities laws with the sale of its native LBRY credits (LBC), which the firm maintained were not securities. A New Hampshire judge ruled in favor of the SEC in November and the final ruling was filed on July 11. Following the ruling, LBRY said it would shut down.
Under the ruling, LBRY must pay a $111,614 penalty. That was revised down from $22 million in May by the regulator citing the company’s “near-defunct status.” The company was also “permanently restrained and enjoined from” participating, directly or indirectly, in violating federal securities laws or any unregistered crypto securities offering.
“LBRY is appealing the [court’s] decision because it is unjust and incorrect,” CEO Jeremy Kauffman wrote in an email to CoinDesk. “The SEC has shown clear intent to use this ruling to damage the cryptocurrency industry more broadly. We won’t let them.”
Blockchain platform Ripple Labs is facing similar SEC allegations over the sale of $1.3 billion in XRP tokens. Legal experts have told CoinDesk that a federal judge’s July ruling partially in favor of Ripple – that direct sales of XRP to institutional investors violated securities law, but programmatic sales to retail investors through exchanges had not – could give hope to other firms involved in similar cases.
LBC has dropped about 8.7% in the past 24 hours to $0.012, CoinGecko data shows.
UPDATE (Sept. 8, 15:38 UTC): Adds comment from LBRY CEO Jeremy Kauffman in penultimate paragraph.
Edited by Sheldon Reback.