SEC Drops $22M Fine Against LBRY, Only Seeks $111K

Key Points:

• The SEC seeks to revise $22M punishment against LBRY.
• Instead of $22M, SEC now asks for $111,614.
• Request also asks to stop LBRY from future unregistered offerings of crypto asset securities.

The Securities and Exchange Commission (SEC) is seeking to modify its $22 million penalty against decentralized content platform LBRY, as it has become apparent that LBRY may not have the means to pay the fine.

The SEC filed a motion on May 12 in a New Hampshire District Court, requesting a change to its original request for remedies in its successful case against LBRY. Instead of the original $22 million, which the SEC claimed LBRY had earned from the sale of its token LBRY Credits (LBC), the SEC is now asking for a fine of $111,614. The SEC cited LBRY’s “lack of funds and near-defunct status” as the reason for the decreased penalty.

Moreover, the SEC is asking the court to prevent LBRY from conducting future unregistered offerings of crypto asset securities. In its filing, the SEC recognized and acknowledged LBRY’s representations that it is defunct, ceasing operations, and without the funds to pay a larger fine, and recognizes that a defendant’s ability to pay is a factor when imposing a civil penalty.

The SEC initially filed a civil suit against LBRY in March 2021, alleging that the firm’s LBC sales were unregistered securities offerings. It asked for $22 million in disgorgement and for the court to order LBRY to halt any further LBC sales. In November 2022, the SEC won the case, with the preceding Judge also ruling LBC was a security.

However, in a December filing, LBRY argued that the SEC’s request for $22 million was unreasonable, as it was “vastly” overstated and failed to “deduct any of LBRY’s legitimate business expenses.” According to LBRY, the SEC’s calculation was “based on rough, back-of-the-envelope math” and the amount it sought was “simply not supported by the record.”

Acknowledging LBRY’s concerns, the SEC is now seeking a reduced penalty, which it believes balances the need to deter future violations with LBRY’s inability to pay. With this in mind, the SEC has requested the court to impose a fine of $111,614 instead of the original $22 million.

LBRY had previously mentioned that it “will likely be dead in the near future” due to being “killed by legal and SEC debts” in December 2022, around a month after the SEC won the case.

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