SEC Shows Mercy Against LBRY in Lawsuit, Reduces $22,000,000 Fine to $111,000
The U.S. Securities and Exchange Commission (SEC) has reduced a $22 million fine against file-sharing and payments protocol LBRY to just $111,614.
LBRY lost a court case with the SEC in November of last year after a federal judge ruled that the company violated securities laws when it raised about $12.2 million worth of proceeds from selling its native token, LBC.
The SEC initially requested $22 million in disgorgement from LBRY, but the company pushed back against that figure in an objection in December, claiming the number represented a vast overestimation of the proceeds it made from LBC sales.
The SEC is now requesting in a new memorandum that the court simply issue LBRY a civil penalty of $111,614, without any disgorgement.
“Notwithstanding the availability of disgorgement as a remedy in this case, the Commission, considering the information and sworn testimony received during the supplemental discovery period, withdraws its request for disgorgement because of LBRY’s (including its wholly owned subsidiary’s) lack of funds and near-defunct status.”
The SEC also requests that the court issue an injunction restraining LBRY from violating Section 5 of the Securities Act of 1933 and from conducting unregistered offerings of crypto asset securities.
The company says it doesn’t need the injunction because it is already winding down operations and plans to burn its current LBC holdings. The SEC, however, notes that LBRY has yet to do either of those things.
“Therefore, LBRY should be enjoined, at least until LBRY dissolves and burns its LBC. The alternative approach – not enjoining LBRY unless it fails to dissolve and burn its tokens – leaves this Court and the Commission in the difficult-to-manage position of having to monitor LBRY’s activities, and requires a then dissolved LBRY to prove to the Court it has destroyed its LBC holdings and that it no longer exists. In addition, the time before LBRY dissolves may prove to be the time of greatest risk of further violation – a cash-strapped defendant who knows that it will cease to exist as a legal entity may have a sense of impunity and be more likely to violate the securities laws during that time.”
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