Yet another cryptocurrency-focussed fundraising activity see to have irked the Securities and Exchange Commission of the United States.
In the latest development, the country’s federal government agency has filed a lawsuit against the decentralized content publishing platform, LBRY Inc., wherein it accused the company of conducting an unregistered securities offering in the form of its token.
The complaint has charged LBRY with violating the registration provisions of Sections 5[a] and 5[c] of the Securities Act of 1933. The agency has also sought “permanent injunctive relief, disgorgement plus prejudgment interest, and civil penalties”.
According to the complaint, the digital content marketplace allegedly sold digital asset securities called “LBRY Credits” to several investors, including investors based in the US.
The regulatory watchdogs also alleged that LBRY did not file a registration statement for the offering and that the offering failed to satisfy any exemption from registration. The official document read,
“The complaint further alleges that by failing to file a registration statement, LBRY denied prospective investors the information required for such an offering to the public.”
Moreover, LBRY allegedly received over $11 million in not just USD but also in cryptocurrency such as Bitcoin, and services from buyers who participated in its offering.
However, the complaint noted that it has accused LBRY of failing to register their tokens as securities and not a fraud. Hence, if the New Hampshire-based crypto startup agrees to pay the settlement charges with the regulatory agency, the agreement would require, the LBRY to compensate the investors, pause the offering and pay back all fees it had already raked in.
Reaction To SEC Suing LBRY
LBRY had shrugged off the allegation in its latest tweet,
“HELP US SAVE CRYPTO. The future of crypto in the US is at risk. The SEC is suing us and saying LBC is security – it’s not! Essentially, they brought the case against us because we’re the biggest. If we lose, the entire industry in the US at risk. All crypto is at risk.”
Several notable individuals in the cryptocurrency industry have criticized the latest move. Attorney Jeremy Hogan also tweeted,
“Ripple wasn’t the first and won’t be the last. The whole industry is at risk.”
Many of them even compared the claims with regards to the lawsuit brought about for the blockchain company Ripple by the agency in last December. Lawyer Jesse Hynes stated that the claims against LBRY “are far less egregious than the claims against Ripple”.