Sadly the cryptocurrency platform LBRY has announced it is ceasing operations following a legal defeat to the U.S. Securities and Exchange Commission (SEC). The regulator accused LBRY of selling its native LBC tokens in an unregistered securities offering.
Keypoints
- LBRY Inc. announced it is shutting down after losing a lawsuit filed by the SEC last year alleging illegal securities sales.
- The company owes millions in legal fees and debts, including to the SEC which was awarded a $111k fine. LBRY had tried appealing but is now halting efforts.
- The SEC accused LBRY of selling LBC tokens in an unregistered securities offering. A judge ruled LBC could be a security based on how it was sold.
- LBRY created the decentralized LBRY network and Odysee video platform. It says the network may continue since it is open source, but could falter without company support.
- The news comes as Ripple scored a big win with the SEC agreeing to drop charges against its executives over XRP sales. Some see this as the SEC being on the backfoot.
- Unlike Ripple, LBRY lacked the resources to continue fighting the regulator in court. This highlights disparities in crypto companies’ abilities to take on the SEC.
- Critics argue the SEC overreached in targeting a small company like LBRY instead of focusing on major failures in crypto. But the agency still extracted a settlement.
In a statement, LBRY Inc. said the combination of debts owed to the SEC, its legal team, and private creditors totaling several million dollars had forced the company to shut down. This comes after the SEC was awarded a reduced fine of $111,614 against LBRY, which the company had initially sought to appeal.
LBRY Inc. is winding down.
The LBRY network is unaffected.
Odysee and other assets will undergo a legal process to satisfy debts, but Odysee has a bright future ahead.
Thank you to everyone who fought with us for online freedom.
A final goodbye post is in the first reply.
— LBRY ???? (@LBRYcom) October 19, 2023
LBRY created the decentralized LBRY network for sharing content and launched Odysee as a video platform built on it. The company warnings its blockchain may continue as an open source project but could flounder without active development and users.
The shutdown highlights the existential risks crypto firms can face when targeted by regulators, especially smaller startups lacking ample financial resources. While the SEC failed to get the major penalties it wanted, legal costs alone were enough to crush LBRY’s chances of survival.
Critics have accused the SEC of regulatory overreach in pursuing LBRY, arguing the agency should have focused on major failures in crypto rather than a minor case of securities non-compliance. However, the outcome reinforces the SEC’s power to police crypto through enforcement actions.
LBRY’s demise coincided with a major win for Ripple in its ongoing legal battle with the SEC. The regulator moved to drop charges against Ripple’s CEO and executive chairman related to XRP token sales. Unlike LBRY, Ripple has the backing of a multi-billion dollar company to continue its court fight.
The divergent outcomes highlight the unequal access to justice based on crypto companies’ financial capabilities. Some legal experts warn Ripple still faces significant litigation ahead over penalties for institutional XRP sales made without registration. But for now, the SEC’s concession marks a setback to its recent string of crypto enforcement victories.
