SEC Withdraws Request for Disgorgement in LBRY Case Due to Lack of Funds
In the latest development of the ongoing LBRY case, the Securities and Exchange Commission (SEC) has filed a supplemental brief that amends the relief requested in its opposition to LBRY’s motion to “Limit the Commission’s Remedies.”
According to James K. Filan, who shared the update on Twitter, the SEC has withdrawn its request for disgorgement for reasons it cited as “LBRY lack of funds and near defunct status.”
#XRPCommunity #XRP In the LBRY case, the SEC has filed a Supplemental Brief on Remedies requesting a civil penalty of $111,614 and for the Court to enjoin LBRY from violating Section 5 of the Securities Act. https://t.co/I8dzNmVqpP
— James K. Filan 🇺🇸🇮🇪 (@FilanLaw) May 12, 2023
The SEC’s decision to withdraw its request for disgorgement is based on the information and sworn testimony received during the supplemental discovery period. The Commission noted that LBRY, including its wholly owned subsidiary, lacks the funds to pay disgorgement and is in a near-defunct status. Despite this, the SEC has requested the court to impose a civil penalty of $111,614 and enjoin LBRY from violating Section 5 of the Securities Act and from conducting unregistered offerings of crypto asset securities.
The court order also requires LBRY to destroy its holdings of LBC and dissolve as it had promised earlier. LBRY had previously lost its lawsuit with the SEC, and the regulator moved to impose a penalty equal to LBRY’s full pecuniary gain of $22,151,971. The SEC claimed that LBRY’s gross receipts for its Section 5 violation equaled the value it received in exchange for its sale of 280 million LBC from its premine and market-making activity on multiple crypto asset trading platforms, which was over $22 million.
The LBRY case has been closely watched by the crypto community and regulators alike, as it could set a precedent for future enforcement actions. The SEC’s decision to withdraw its request for disgorgement is notable, as it suggests that the Commission is taking into account the financial situation of the company it is pursuing. However, the request for a civil penalty and injunction highlights the seriousness of the SEC’s allegations against LBRY and its determination to prevent unregistered offerings of crypto asset securities.
LBRY’s response to the SEC’s latest filing remains to be seen, but the case is likely to continue to attract attention as it unfolds. The outcome of this case could have far-reaching implications for the crypto industry, particularly with regards to the regulatory treatment of token offerings. It remains to be seen how the court will rule in this case, but the crypto community will undoubtedly be watching closely.
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