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.”
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.