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LBRY Inc – the company behind the development of the LBRY protocol – has declared it will cease operations following a final ruling in its legal battle with the U.S. Securities and Exchange Commission (SEC) on Tuesday.
In the wake of this announcement, the value of LBRY token (LBC) has plummeted by 14%.
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- A federal judge ruled in favor of the SEC, determining that LBRY breached Section 5 of the Securities Act of 1933 in its issuance of LBC.
- Consequently, it has been permanently restrained and prohibited from further issuance of any “security” unless it is registered with the commission beforehand.
- LBRY is also mandated to pay a fee of $111,614 for its violation within the next thirty days. This amount represents a significant reduction from the SEC’s initial fee demand of $22 million.
- Via Twitter, LBRY confirmed that it will fully wind down its operations, allowing the community to decide how to utilize its LBC token.
- LBRY is a decentralized content platform recognized for its video-sharing service, Odyssey. The platform utilized LBC as the internal currency enabling creators to charge viewers for streaming their content or to receive tips.
- During the proceedings, the SEC highlighted that one of LBRY’s explicitly stated purposes for LBC was to “financially support its operations,” which aligns with the characteristics of a security under the Howey Test.
- Ultimately, Judge Paul Barbadoro ruled in November that “no reasonable trier of fact could reject the SEC’s assertion that LBRY offered LBC as a security.”
- This case is believed to establish a concerning precedent for other crypto creators, who are apprehensive that their token issuance models may be deemed illegal by the SEC.
- In June, the agency claimed that several leading cryptocurrencies were securities in a lawsuit against Coinbase, including Cardano (ADA), Solana (SOL), and Polygon (MATIC).
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