SEC revises to seek $111K against LBRY

The United States securities regulator is attempting to revise its $22 million penalty against the decentralized content platform LBRY, recognizing that it is unlikely to be able to pay it.

The Securities and Exchange Commission requested an amendment to its request for remedies in its successful case against LBRY, which was filed on May 12 in a New Hampshire district court.

Instead of seeking the original $22 million — the amount it claims LBRY gained from the sale of its token LBRY Credits (LBC)—the SEC has asked the court to levy a $111,614 fine, citing LBRY’s “lack of funds and near-defunct status.”

The request also seeks to prevent LBRY from “conducting future unregistered offerings of crypto asset securities.”

“The Commission acknowledges LBRY’s representations that it is insolvent, ceasing operations, and lacks the funds to pay a larger fine,” the SEC stated in the filing. “The Commission recognizes that a defendant’s ability to pay is a factor when imposing a civil penalty.”

In March 2021, the SEC initially filed a civil suit against LBRY, alleging that the company’s LBC sales were unregistered securities offerings. It requested $22 million in disgorgement and that the court order LBRY to cease all LBC sales.

In November 2022, the SEC prevailed in the case, with the preceding judge also determining that LBC was a security.

The SEC stated that the reduced penalty was a compromise between “the need to balance the deterrence from a penalty with LBRY’s inability to pay.”

In a December filing, LBRY argued that the SEC’s $22 million demand was unreasonable because it was “vastly” exaggerated and failed to “deduct any of LBRY’s legitimate business expenses.”

LBRY asserted that the SEC’s calculation of the amount was “based on rough, back-of-the-envelope math” and that the amount sought was “simply not supported by the record.”

In December 2022, roughly one month after the SEC won the case, LBRY stated that it “will likely be dead shortly” as a result of being “killed by legal and SEC debts.”