SEC Accuses LBRY of Selling Unregistered Securities
- The SEC has requested a permanent injunction against LBRY, prohibiting it from further selling its LBC token.
- The decentralized content publishing platform has echoed Ripple’s statement that these lawsuits were a “tremendous threat” to the entire crypto industry.
Sign at the U.S. Securities and Exchange Commission in Washington, DC, 17 July 2015. Shutterstock
The U.S. Securities and Exchange Commission (SEC) is now pursuing another lawsuit against a crypto startup, accusing it of having sold unregistered securities, the SEC said in a press release on 29 March.
This time the U.S. watchdog has set it sights on decentralized content publishing platform LBRY, which the SEC alleges sold “millions of dollars worth of unregistered securities to investors” in the form of its in-house token LBRY Credit (LBC). According to court documents, the SEC requests a permanent injunction against the firm, prohibiting it from further selling its LBC token, and the repayment of “ill-gotten gains” plus interest.
The SEC said LBRY received more than $11 million in U.S. dollars in exchange for its LBC token, which it alleges were sold as investment contracts. The watchdog also alleged the firm created an air of credibility that it could generate a profit by employing a middleman to use 40 million LBC tokens and act as a market maker, continuously buying and selling the tokens at prevailing market prices.
These allegations have forced LBRY to seek help from the cryptocurrency community, saying that the lawsuit was a “tremendous threat” to the entire cryptocurrency industry, which is similar to what Ripple said when it was hit with the same accusations of selling an unregistered security back in December. LBRY further wrote on its FAQ page:
“LBRY Inc has been preparing to fight this case for three full years, which is how long the SEC has been investigating this matter. We wanted to tell you sooner, but transparency in ongoing investigations is not welcomed by the SEC.”
- During an interview with FT, CEO Brian Armstrong said that before the lawsuit a SEC staff member had said that all crypto except BTC was security, and should be delisted.
- When asked how he came to that conclusion, the SEC staff member reportedly said “we’re not going to explain it to you, you need to delist every asset other that Bitcoin”.
Coinbase CEO Brian Armstrong appears on stage at the 2014 TechCrunch Disrupt Europe/London, at The Old Billingsgate on October 21, 2014 in London, England. Anthony Harvey/Getty Images for TechCrunch
- The U.S. SEC, CFTC, and FTC have all filed separate lawsuits against bankrupt crypto lender Celsius and its former CEO Alex Mashinsky, charging them with multiple counts of fraud.
- Mashinsky was also arrested in New York on Thursday, and later charged by the Department of Justice with securities fraud, commodities fraud, and wire fraud.
- The U.S. regulator has alleged that the platforms offered unregistered securities to the general pubic in the form of the BNB token and BUSD stablecoin.
- Binance was also accused of failing to register as an exchange, and that it had comingled funds between its global and U.S. platforms.