The US Securities and Exchange Commission (SEC) has revised the initial punishment against a blockchain-based content provider, LBRY.
It has significantly reduced the penalty from the previous $22 million to a revised amount of approximately $111,000.
SEC Revises Initial Penalty On LBRY
The decentralized content-sharing platform that utilizes blockchain technology found itself in legal trouble when the SEC alleged it conducted an unregistered securities offering.
The SEC filed a suit against the firm in March 2021, as the agency alleged that LBRY’s sale of digital tokens, LBC, qualified as the sale of unregistered securities.
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The case sparked a legal battle between LBRY and the SEC. The company contested this, arguing that their tokens were not securities and did not fall under the regulatory framework of traditional securities offerings.
However, the case turned out in favor of the SEC in November 2022, with the previous Judge ruling that the tokens were securities.
The regulatory body demanded a fine of $22 million as a penalty for the alleged violation and instructed the company to cease such offerings.
But LBRY stated in a December 2022 filing that the SEC’s request for $22 million was unrealistic given that the firm has not made such huge expenses in all its business dealings.
It noted that the agency’s deduction of the sum was simply rough math, and the record does not support the amount.
Furthermore, the agency realized the firm lacks adequate funds and may likely shut down its operations if it must pay such an amount. These became the major reasons for revising the initial punishment, according to information that came from a May 12 New Hampshire District Court filing.
SEC’s Crackdown On Cryptocurrencies
The SEC’s stance on digital assets can impact investors differently. If the SEC determines that certain digital assets fall under its definition of securities, it may impose trading restrictions on them.
This means that investors may face hurdles in trading their favorite digital currencies as they must comply with additional regulatory requirements, such as using SEC-approved assets and platforms.
These restrictions can limit the liquidity and accessibility of certain digital assets, making it more challenging for investors to engage in the market. This was evidenced in the Ripple case, as the SEC mandated all the crypto platforms in the US to delist XRP.
However, the SEC’s regulatory approach also aims to protect investors. The regulator helps safeguard investors from fraudulent activities, scams, and market manipulations by enforcing regulations and scrutinizing digital asset offerings.
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