US securities regulators are seeking to revise a $22 million penalty on decentralized content platform LBRY, acknowledging that it is unlikely to come up with the funds to pay.
In a May 12 filing with New Hampshire District Court, the SEC sought to amend its request for relief in its successful case against LBRY. Rather than seeking the original $22 million civil penalty, the amount it claimed LBRY received from the sale of its token, LBRY Credits (LBC), the SEC is seeking a $111,614 fine from the court, citing LBRY's “lack of funds and near-failure state.”
The regulator also dropped its separate $22 million forfeiture request, which it claimed LBRY needed to repay the funds because they were illegally obtained from the sale of LBC. The request also seeks to prevent LBRY from “conducting future unregistered crypto asset securities offerings.”
"The Commission acknowledges LBRY's representation that it ceased to exist, ceased operations, and did not have the funds to pay a larger penalty, and that defender's ability to pay was a factor in imposing civil penalties," the SEC said in the filing. SEC first filed a civil lawsuit against LBRY in March 2021, alleging that the company's LBC sales were unregistered securities offerings. It seeks a total fine of $44 million, split civil penalties and forfeiture of ill-gotten gains, and asks the course t to order LBRY to halt any further LBC sales.
The SEC won in November 2022, while the previous judge also ruled that LBC was a security. The SEC said the smaller fine was a compromise between "balancing the deterrence of penalties against the need for LBRY's inability to pay."
In a December filing, LBRY claimed that the $22 million requested by the SEC was unreasonable because it was "substantially" inflated and failed to "deduct any of LBRY's legitimate business expenses." LBRY said the SEC's calculation of the sum was "based on rough rough calculations" and that the amounts it sought were "simply not supported by records."
In December 2022, about a month after the SEC won the case, LBRY said it was "probably dead in the near future" because it was "killed by the law and by SEC debt."
