SEC targets crypto startup LBRY for alleged sale of unregistered securities

Firm claims SEC misconduct, says move targets the broader crypto realm
  • In a new filing of a suit by the SEC against another crypto firm, LBRY is now flagged in a case of sale of unregistered securities.
  • Interestingly, LBRY does not even operate with cryptocurrencies, whereas it is just a blockchain-based platform for sharing digital content.
  • However, it does possess its native token, which is the SEC’s subject of the suit filed.

Cryptocurrencies and blockchain products, in general, are generally perceived as not falling under the ambit of a security or a commodity. However, the Securities and Exchange Commission (SEC) is currently acting as the de-facto agency regulating and oversees crypto-based transactions in the country.

Unregistered sale of tokens

The New-Hampshire-based blockchain firm, LBRY, is involved in buying and publishing digital content in a decentralized manner on its platforms with about 10 million people. It uses its native token, the LBRY Credits, to conduct transactions between the platform and the corresponding content authors. In a recent statement, the SEC held the firm accountable for the sale of unregistered securities in the form of LBRY Credits to the company’s stakeholders. Furthermore, the agency states that from July 2016 to February 2021, LBRY sold Credits to investors while neither registering them as securities nor applying for an exemption from filing a registration statement. The SEC complaint states that, as a result, the company had raised a capital of $11 million.

Ripple and Kik previously targeted

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The SEC complaint is relatively unsurprising as Ripple – a distributed ledger company, and Kik – a messenger app, had earlier been SEC targets. The main point of contention seems to be the classification of digital cryptographic assets as securities that puts it under the SEC’s jurisdiction in the first place.

In response to the recent circumstances, LBRY claimed that the lawsuit is blasphemous to the whole crypto industry. However, the firm also indicated that it had been a subject of the SEC’s investigation for three years. It also stated that the SEC’s tradition of non-transparency had prevented them from disclosing the information earlier.

It is not clear if a class action lawsuit will be filed by all the crypto agencies involved or if LBRY will take the trial to the court.

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Andrew Smith
Andrew is a blockchain developer from his education and developed his interest in the cryptocurrencies while his post-graduation. He is a keen observer of details and shares his passion for writing along with being a developer.

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