The SEC, in its zeal to demonstrate its usefulness, recently filed a complaint against an innovative member of the blockchain community known as LBRY. The company launched a decentralized video sharing platform known as Odysee which enables those who view videos on its system to earn cryptocurrency. It also enables creators to earn LBRY Credits (LBC) for the work they produce.
As of 2016, 13 million LBC tokens were sold for $5 million in Bitcoin. Yet, the SEC published a press release stating that the total amount raised was $11 million, which included USD and services from coin holders who were part of its offering. Their complaint is part of a three-year investigation dating back to May 2018.
The SEC claims that LBRY allegedly sold unregistered securities over a four-year period, including to institutional investors. The agency is seeking a permanent injunction that would prevent LBRY from selling more digital tokens, disgorgement of all money received plus interest, and an undisclosed amount in civil penalties.
LBRY has said that it did not conduct an ICO (Initial Coin Offering), and the SEC is not alleging fraud. Nevertheless, “The SEC declined to offer any terms that would have made it viable for U.S. citizens to exchange tokens or to allow LBRY Inc to continue to operate. We were willing to give them a pound of flesh, but they were only interested in our head.”
Even though the company has already spent over $1 million in legal fees and thousands of hours of effort during the investigation, LBRY is not backing down. They stated, “The SEC is advancing an aggressive and disastrous new standard that would make almost all blockchain tokens securities.” Indeed, this is a new, dark chapter in the SEC’s aggressive tactics. “Classifying all actively-developed blockchain tokens as securities will be a bureaucratic nightmare for United States residents and businesses operating in the U.S.”
There is no way any government can effectively regulate every blockchain token. That would be akin to Feds trying to shutdown every speakeasy in New York City during Prohibition – truly an effort of futility. LBRY has started a petition on its website, helplbrysavecrypto.com, that has over 6,700 signatures thus far. It calls for “the SEC to drop this case and establish clear standards for the cryptocurrency industry in the United States.”
When LBRY asked the SEC how it could operate legally, the response they received was that the agency could not advise on such matters and would only say they are breaking the law. In the event that the SEC shuts down the company, the platform and ecosystem they developed will remain unaffected since it is fully decentralized with “hundreds of people across six continents” who have contributed to the network in 2020 – most of whom are not LBRY employees.
This is why META 1 Coin Trust has been so adamant about the need to operate as a Private Non-Statutory Trust and a Secured Party Creditor. Being jurisdictionless and decentralized are key during these challenging times as innovative crypto projects are persecuted by agencies that try to take away civil liberties that the Founding Fathers fought so hard to secure. We applaud the efforts of LBRY to fight back against this unjust litigation and wish them the utmost success in their efforts.