The Securities and Exchange Commission’s new target is LBRY, Inc. As with Ripple, the regulator has accused the company of “not having registered a security offer,” according to a document filed in the New Hampshire Judicial District.
According to the complaint filed by the SEC, LBRY sold “millions” of securities known as LBRY Credits (LBC) to fund the business and product development. The company allegedly received Bitcoin, US dollars, and “cashless compensation” in exchange for the tokens. Investors in LBC expected returns on the capital they invested in LBRY.
The SEC estimates that from 2016 to 2020, over 13 million LBCs were sold for $ 5 million that went into BTC. The SEC aims to “wind up” the funds it received for “unlawful conduct” and prevent LBRY from participating in “unregistered digital asset securities offerings.”
How LBRY wants to store crypto
In late 2020, the commission filed a similar complaint against Ripple Labs and some of their executives over the alleged unregistered sale of XRP. Ripple is in legal proceedings with the regulator.
LBRY is represented by Perkins Coie law firm and lawyers Keith Miller and Adam Schuman. In addition, the company has launched a website called “Help LBRY save crypto”. There they offer their side of the story, claiming that the SEC’s allegations pose “a tremendous threat to the entire crypto industry.”
By differentiating between LBRY Inc and the LBRY network, they reassure users that their platform is decentralized and separate from the future of the company. They add that the LBRY protocol will remain active and the holders’ funds will remain safe. The company said:
In this case, it’s about overregulation. The SEC does not allege fraud or indict any individual.
The company then makes a counter-argument against the charges brought by the commission. They deny that the token LBC is a security and that its use case is speculation based on “the facts and experiences” they had on the platform.
LBRY network users use the token for multiple uses, including creating an identity, tip creators, publishing, buying, or increasing content “in a decentralized manner”, as per the company’s arguments. They add that these use cases were active long before LBC was sold.
Just like Ripple, LBRY claims that its attempts to reach an agreement with the SEC have been unsuccessful. The regulator’s terms and conditions included taking the LBC out of circulation. LBRY claims:
We were ready to give them a pound of meat, but they only cared about our heads.
In addition, the company claims to have asked the SEC for instructions to “operate legally”. According to LBRY, the regulator could not give an answer.
The company believes that the regulator’s actions could pose a risk to all blockchain technology and the companies operating in the sector if its development was funded, directly or indirectly, by a token. Legal expert Gabriel Shapiro commented on the case:
It was understandable at first not to offer a viable route and continue to sue creators while the SEC worked to figure out the space. Now it’s inexcusable, unethical, and in violation of key American legal principles of predictability and economic freedom.
XRP is trading at $ 0.56, up 4.1% over the past week and modest returns on the 24-hour chart. Last month, XRP saw gains of 28.4%.
The community has requested the token to be listed again in the past few days. In response, the Japanese exchange OKCoin recently announced that it will allow XRP trading on its platform after April this year.