The Securities and Exchange Commission (SEC) charged crypto firm LBRY with selling unregistered securities
The U.S. Securities and Exchange Commission (SEC) filed a lawsuit against New Hampshire-based crypto startup LBRY Inc., accusing the company of selling unregistered securities in the form of its token.
The Securities and Exchange Commission (SEC) has charged LBRY with selling unregistered securities
LBRY is a decentralized publishing platform that claims 10 million users, facilitated its operations via LBRY Credits, which are blockchain-based tokens. LBRY operates a decentralized content publishing platform. According to the company, the firm’s in-house tokens, dubbed LBRY Credits, are used as part of the platform to publish and buy content.
According to the SEC, before developing the network, it sold the tokens as investment contracts, with the assumption that their value would go up. All told, alleges the SEC in a complaint filed today in a US District Court, LBRY received more than $11 million in U.S. dollars, Bitcoin, and services from purchasers who participated in its offering.
The SEC said in a statement published Monday as below:
“According to the SEC’s complaint, from at least July 2016 to February 2021, LBRY, which offers a video sharing application, sold digital asset securities called “LBRY Credits” to numerous investors, including investors based in the US. The complaint alleges that LBRY did not file a registration statement for the offering and that the offering failed to satisfy an exemption from registration.”
This amounted to an unregistered sale of securities, in violation of the Securities Act of 1933. LBRY framed the lawsuit as a broader attack on the U.S. crypto industry, an approach that mirrors those taken by messenger app Kik and, more recently, distributed ledger firm Ripple.
LBRY wrote in the FAQ section of a website it launched in the wake of the lawsuit’s filing:
“The Securities and Exchange Commission has filed a complaint against LBRY Inc alleging that all distributions of LBRY Credits by LBRY Inc are unregistered securities offerings. This claim is a tremendous threat to the entire cryptocurrency industry.”
The SEC wrote in its complaint:
“LBRY used the capital it raised from sales of LBC to pay for the operational costs to grow the LBRY Network, which, as LBRY publicly represented, would cause the price of LBC held by investors to appreciate. Because LBRY was the largest holder of LBC, it also expected to profit from any appreciation in the value of LBC.”
In the FAQ, LBRY indicated that it had been the subject of an SEC inquiry for three years.
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