LBRY Inc – the firm responsible for developing the LBRY protocol – has announced it will close operations after receiving a final judgment in its case with the U.S. Securities and Exchange Commission (SEC) on Tuesday.
Since the announcement, LBRY token (LBC) has collapsed 14% in value.
- A federal judge sided with the SEC in ruling that LBRY violated Section 5 of the Securities Act of 1933 in its issuance of LBC.
- As such, it has permanently restrained and enjoined from further issuance of any “security” unless registered with the commission in advance.
- LBRY is also required to pay a $111,614 fee for its violation within the next thirty days. This is a massive reduction from the SEC’s original fee request, which was $22 million
- Over Twitter, LBRY confirmed that it will be completely winding down its operations, with the community free to decide how to make use of its LBC token.
- LBRY is a decentralized content platform known for its video-sharing platform, Odyssey. The platform leveraged LBC as the internal currency with which creators could charge viewers for streaming their content, or earn tips.
- Throughout the case, the SEC noted that one of LBRY’s explicitly stated uses for LBC was to “financially support its operations,” which is one of the hallmarks 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 contention that LBRY offered LBC as a security.”
- The case is thought to set a dangerous precedent for other crypto creators, who fear their token issuance models may have been illegal in the SEC’s view.
- In June, the agency alleged that multiple top cryptos were securities in a lawsuit against Coinbase, including Cardano (ADA), Solana (SOL) and Polygon (MATIC).