The US Securities and Exchange Commission (SEC) is pursuing a revision of its $22 million penalty imposed on the decentralized content platform LBRY.
Recognizing LBRY’s limited capacity to fulfill the fine, the SEC submitted a request for amendments to the New Hampshire District Court on May 12. Instead of the initial $22 million, which allegedly represented the gains from LBRY’s LBRY Credits (LBC) token sales, the SEC proposed a reduced fine of $111,614.
The commission cited LBRY’s near-defunct status and lack of funds as the basis for the revision.
In addition to the penalty reduction, the SEC requested the court to prohibit LBRY from conducting future unregistered offerings of crypto asset securities.
Acknowledging LBRY’s representations of being defunct and ceasing operations, the SEC acknowledged the defendant’s inability to pay a more significant fine, noting that the defendant’s financial capabilities factor into determining civil penalties.
The SEC initially filed a civil lawsuit against LBRY in March 2021, alleging that the unregistered sales of LBC constituted securities offerings. Alongside the $22 million disgorgement request, the SEC also sought an injunction to halt any other LBC sales by LBRY.
The SEC emerged victorious in the case in November 2022, with the presiding judge ruling that LBC qualified as a security.
According to the SEC, proposing a reduced penalty was an attempt to strike a balance between the need for deterrence and LBRY’s financial constraints.
LBRY’s criticism of SEC’s calculation and excessive demand
In a filing submitted in December, LBRY contended that the SEC’s initial $22 million demand was exorbitant and overlooked reasonable operational costs associated with their business.
LBRY criticized the SEC’s calculation methodology as based on rough estimations, claiming that the requested amount lacked proper support from the evidence.
LBRY further expressed concerns about its viability, warning that it would likely face financial ruin due to mounting legal and SEC debts. The declaration came around a month after the SEC’s legal victory in November 2022, suggesting a bleak outlook for LBRY’s prospects.
As the SEC pursues a revision of the penalty against LBRY, the outcome of this ongoing legal battle will have significant implications for the decentralized content platform and the broader crypto industry.
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