The SEC initially wanted LBRY to pay millions of dollars in penalties, but now realizes the company cannot afford to pay that much.
The US securities regulator wants to change its $22 million penalty against LBRY, a decentralized content platform. They now understand that LBRY probably doesn’t have enough money to pay that amount.
On May 12, the Securities and Exchange Commission (SEC) asked a court in New Hampshire to make changes to its request for actions to be taken in the case against LBRY. The SEC had previously won the case against LBRY.
The SEC originally wanted LBRY to pay $22 million, which they claimed LBRY earned from selling LBRY Credits (LBC). However, now the SEC is asking the court to impose a smaller fine of $111,614 because LBRY doesn’t have much money left and is almost out of business.
The request also asks to prevent LBRY from selling more crypto assets without proper registration in the future.
In the filing, the SEC stated that they understand LBRY’s claim of being defunct, no longer operating, and lacking sufficient funds to pay a higher fine. They also mentioned that considering a defendant’s ability to pay is an important factor when determining a civil penalty.
Spending millions of dollars for a fine of only $111,614 seems excessive, especially when it leads to the financial ruin of a company. It doesn’t seem like a helpful outcome for the world.
The SEC filed a lawsuit against LBRY in March 2021, claiming that the sales of LBC tokens by the company were not registered as securities offerings.
The SEC requested $22 million in disgorgement (repayment of illegally obtained funds) and asked the court to stop LBRY from selling any more LBC tokens. In November 2022, the SEC won the case, and the judge ruled that LBC tokens were indeed considered securities.
The SEC explained that the reduced penalty was a compromise, taking into account the importance of deterring future violations while considering LBRY’s financial inability to pay a larger amount. LBRY had previously argued in a filing that the SEC’s request for $22 million was unreasonable because it was significantly overstated and did not account for their legitimate business expenses.
The SEC reduced the penalty as a compromise, considering the need to prevent future violations and LBRY’s inability to pay a larger amount.
LBRY had argued that the SEC’s request for $22 million was unfair because it was much higher than necessary and didn’t consider their legitimate business expenses.