The US Securities and Exchange Commission (SEC) is trying to significantly reduce the penalty fine imposed on decentralized content platform LBRY from $22 million to around $111,000. In a request filed with New Hampshire District Court on Friday, the commission argued that LBRY was unlikely to pay the multi-million dollar fine. The SEC has proposed a revised fine of $111,614, citing LBRY’s depleted financial resources and moribund status as the basis for this reduction.
The SEC acknowledged LBRY’s claim that it had ceased operations, lacked the funds to pay larger fines, and was essentially out of business. The Commission recognizes that the ability of a defendant to pay was a relevant factor when determining the amount of a civil sentence. Alongside the proposed penalty reduction, the watchdog body also urged LBRY to stop offering unlisted crypto-asset securities in the future.
The SEC originally filed a civil lawsuit against LBRY in March 2021, alleging that the platform conducted an unregistered sale of LBRY Credits (LBC) tokens, resulting in a profit of $22 million. In November of the same year, the SEC won the case, with a court ruling that the LBC LBRY token qualifies as a security and is subject to US securities laws. The judgment held that LBRY had no valid defense claiming a lack of fair SEC notice.
LBRY argues that the LBC token is not a security but a digital currency that is integral to the LBRY Blockchain. The company argues that the SEC’s request for a fine of $22 million is excessive and fails to consider legitimate business costs. LBRY accused the commission of calculating the requested amount inaccurately, characterizing estimates based on basic calculations that do not match actual records.
LBRY has also raised the issue of financial viability, as the company anticipates a potential collapse due to rising legal fees and SEC debt. Launched in 2018, LBRY aims to streamline content distribution and access via a decentralized network. The market capitalization of the LBC LBRY token is currently $6.6 million, categorizing it as a micro-cap token by global standards. CoinGecko data reveals that the token, currently trading around $0.0102, hit an all-time high of $1.60 in July 2016.