LBRY fires back at SEC over ‘aggressive and disastrous’ securities complaint

LBRY is in the SEC’s firing line for selling unregistered securities. It claims the case could set a precedent that would affect much of the industry.

Blockchain company LBRY, Inc. has hit back at the Securities and Exchange Commission, saying a complaint filed against it threatens much of the crypto industry because it would define most tokens as securities.

The SEC has been looking into the blockchain-based publishing platform LBRY, Inc. as part of a three-year investigation that started in May 2018.

According to the complaint filed by the SEC, the platform is alleged to have sold unregistered securities across multiple avenues including to institutional investors and platform users between 2016 and 2020.

The regulator is seeking a permanent injunction to prevent the company from selling more tokens, disgorgement of all funds received with interest, and to pay an undisclosed amount in civil penalties.

LBRY developed a decentralized video sharing platform called Odysee that allows viewers to “earn cryptocurrency for watching videos” and for creators to earn LBRY Credits for their work. Since 2016, 13 million LBC tokens were sold for $5 million in Bitcoin. A press release from the SEC states the total amount raised was $11 million, including USD and services from purchasers who participated in its offering.

According to LBRY, while it did not conduct an initial coin offering (ICO) and the SEC is not alleging fraud, its attempts to settle have been rejected by the Commission:

“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. We were willing to give them a pound of flesh, but they were only interested in our head.”

Despite already spending “more than $1 million on legal fees” and the momentous effort of “several thousand hours of team members' time” during the investigation, the company is not backing down, stating: “The SEC is advancing an aggressive and disastrous new standard that would make almost all blockchain tokens securities.”

“Classifying all actively-developed blockchain tokens as securities will be a bureaucratic nightmare for United States residents and businesses operating in the US.”

A petition on its website “helplbrysavecrypto.com” with more than 6,700 signatures to date calls on “the SEC to drop this case and establish clear standards for the cryptocurrency industry in the United States.”

HELP US SAVE CRYPTO IN THE USA
The entire future of crypto in US is at risk.

The SEC are suing us and saying LBC is a security - it’s not! This impacts every token!https://t.co/P26tQatXht #helplbrysavecrypto pic.twitter.com/sgbeoxNMMC
— Odysee (@OdyseeTeam) March 29, 2021

LBRY claims that when it asked the SEC how it could operate legally, it was told that the regulatory body could not advise on that and could only say that they were breaking the law.

However the firm stated that should the SEC succeed in shutting down LBRY, Inc., the LBRY platform and ecosystem will remain unaffected as it is fully decentralized with “hundreds of people across six continents,” most of which are not LBRY employees, contributing to the network in 2020.

SEC Suing LBRY

The Securities and Exchange Commission (SEC) has filed a lawsuit against LBRY.

The complaint relates to the company’s LBRY Credits (LBC), which are used to pay creators who upload digital content to the site. LBRY describes itself as “a people’s marketplace” that aims to distribute value to content creators and consumers. It has a user base of over 10 million.

According to the SEC, the company sold its tokens as investment contracts, beginning in 2016. LBRY Credits were sold, the SEC said, in the expectation that they would appreciate in value. The SEC’s statement read:

“The complaint alleges that LBRY did not file a registration statement for the offering, and that the offering failed to satisfy any exemption from registration.”

The SEC said that the LBRY had “received more than $11 million in U.S. dollars, Bitcoin, and services from purchasers who participated in its offering.”

The complaint goes on to argue that the company was positioned to profit from the LBC tokens. “Because LBRY was the largest holder of LBC, it also expected to profit from any appreciation in value of LBC,” it said.

Content Platform Responds to SEC

LBRY has vocally opposed the SEC’s stance since news of the filing surfaced.

The company took to social media to say that the SEC’s position poses an existential threat to the entire crypto industry, similarly to how Ripple responded to their recent lawsuit.

“HELP US SAVE CRYPTO. The future of crypto in US is at risk,” they wrote on Twitter. They’ve also launched a campaign dubbed “Help LBRY save crypto,” including a Change.org petition. It’s received 2,343 signatures at the time of writing.

The firm has also published a series of FAQs related to the SEC lawsuit. “We do not believe that the LBRY Credit is a security subject to SEC regulation,” it reads. The company claims that LBC has a function beyond speculation since individuals can use it to create an identity, tip creators, and pay for content.

The text reveals that the company had been under investigation since May 2018. It read:

“LBRY Inc has been preparing to fight this case for three full years, which is how long the SEC has been investigating this matter. We wanted to tell you sooner, but transparency in ongoing investigations is not welcomed by the SEC.”

The SEC is seeking a permanent injunction, disgorgement plus prejudgement interest, and civil penalties.

LBRY