US
securities regulator has sought to drastically bring
down the fine it asked the court to slam against LBRY, a
blockchain-based file-sharing and payment network it sued in March 2021. The watchdog had alleged that the crypto
startup’s native LBC tokens were unregistered securities.
The
Securities and Exchange Commission (SEC) previously asked the court to fine
LBRY $22 million for pooling $11 million from its unauthorized offering. However, in a
court document filed on Friday, the regulator asked the court to reduce the
amount to $111,614, noting that it considered the firm’s argument that “it is
defunct, ceasing operations, and without the funds to pay a larger fine.”
Meanwhile,
in the new court filing, the federal supervisor also prayed that the court
“enjoin” or issue an order warning LBRY against violating its provision that
prohibits the offer or sale of securities without registration. It noted that
this request should be granted at least until the firm “destroys its LBC
holdings and dissolves, as it stated to the Court it will do.”
Explaining
the reason for its request, SEC argued that the file-sharing company’s alleged
violation “was a continuous effort conducted over more than five years and
continued well after this case was filed.” The US watchdog further claimed that
LBRY’s conduct was “egregious” and “specifically intended to effect or alter the trading market for LBC.”
Furthermore,
the SEC maintained that the firm has not recognized that its conduct was
unlawful. It added that the crypto startup remains in a position to violate the country’s securities registration law.
LBRY Calls SEC’s Action “Disastrous”
The SEC
started investigating LBRY in May 2018 and filed a complaint against the
company in 2021. In the complaint, the securities regulator accused LBRY of selling unregistered
securities to retail and institutional investors between 2016 and 2021.
Finance Magnatesreported that LBRY had promised investors that it would facilitate a
secondary trading market for its tokens to enable them to cash out their
holdings just as the demand for and the value of the tokens increase. Responding to SEC’s complaint, the company in a website write-up accused SEC of “advancing an aggressive and disastrous
new standard that would make all blockchain tokens securities.”
“Classifying
all actively developed blockchain tokens as securities will be a bureaucratic
nightmare for United States residents…
