SEC raids Manchester Startup for using Cryptocurrency

  • According to Kauffman, if the SEC gets its way, the virtual corporation in Manchester might be required to repay more than $10 million in LBC income
  • He wanted to dethrone YouTube and other video-sharing sites in 2016 using the same blockchain technology that Bitcoin used to revolutionize the idea of money
  • Similar actions have been taken by the SEC against companies related to cryptocurrencies, particularly when the currency is used to produce money

The organization, which ensures that securities markets are fair, says that LBRY’s cryptocurrency tokens are investments that must be registered with them. The tokens, known as LBCs, are presently worth a cent, according to the firm. Credits are used to get access to videos and other LBRY online content. If the SEC has its way, the virtual firm located in Manchester might be forced to refund more than $10 million in LBC revenue, which could bankrupt the company because $8 million of it was invested on growth, according to Kauffman. 

When Jeremy Kauffman founded LBRY Inc. in 2016, he planned to leverage the same blockchain technology that Bitcoin used to alter the concept of money to dethrone YouTube and other video-sharing platforms. He hadn’t anticipated having to deal with the Securities and Exchange Commission in the United States. However, the Securities and Exchange Commission (SEC) filed civil proceedings against LBRY in U.S. District Court in Concord in March.

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The company warns in a marketing campaign that the SEC’s enforcement action against it is a danger to any business that incorporates bitcoin developments into its technology. According to Stephen McKeon, an associate professor of finance at Oregon University who specializes in cryptocurrency regulation, the SEC has filed similar proceedings against firms linked with cryptocurrencies, especially when they use the currency to create money. The SEC says that over the course of five years, LBRY generated more than $5 million in capital by issuing 13 million LBCs. According to the agency, investors were sold the concept that if the LBRY network is expanded out, the LBCs may be worth billions. According to the SEC, LBRY then utilized the funds to expand the firm. The company admitted producing LBCs in court documents, Kauffman said they are mined in the same way Bitcoin and other cryptocurrencies are, but he claimed the money needed to start the company did not originate from LBCs.

The five SEC commissioners are split on how to handle such instances, with one asking for a temporary safe harbor for firms that want to raise cash by issuing unregistered cryptocurrency. According to McKeon, the regulatory landscape is always changing, with technology moving faster than regulation and agencies scrambling to keep up. The Securities and Exchange Commission (SEC), which was founded in the aftermath of the 1929 Wall Street Crash and today employs roughly 4,200 government employees, does not oversee Bitcoin or many other cryptocurrencies. 

That’s because, according to McKeon, Bitcoins aren’t generated by corporations for financial objectives; they’re created by individual miners.

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Andrew Smith
Andrew is a blockchain developer who developed his interest in cryptocurrencies while his post-graduation. He is a keen observer of details and shares his passion for writing along with being a developer. His backend knowledge about blockchain helps him give a unique perspective to his writing

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