The time and resources that the SEC has devoted to the LBRY case would be better spent on building a workable regulatory framework, said Commissioner Hester Peirce.
Some overdue thoughts on our case against LBRY: https://t.co/wLsG4Xr7wz
— Hester Peirce (@HesterPeirce) October 27, 2023
She argued that the market would decide the fate of the project if this condition were met.
In October, the developer of the decentralized media platform Odysee—the LBRY startup—announced the cessation of operations, citing “multimillion-dollar debts.”
«Действия Комиссии вынудили группу предпринимателей отказаться от того, что они создали. Наша непропорциональная реакция отговорит людей от экспериментов с технологией блокчейн», — указала Пирс.
The commissioner noted that the LBRY case illustrates the arbitrariness and real consequences of the regulator’s enforcement-driven approach.
According to her, there was no evidence of fraud, and the firm had taken a conservative approach to digital assets compared with other projects.
Peirce suggested that the team did not have a clear path to register with the SEC.
«This would not be a particularly useful effort», she added.
The commissioner described the regulator’s approach as “extremely harsh.” The legal protections sought were “completely disproportionate to any harm.”
Ripple’s Chief Legal Officer Stuart Alderoty thanked Peirce for publishing criticism of the agency’s actions. He suggested she go further and act as amicus curiae.
Thank you Commissioner. When you see injustices like this continue in non-fraud cases (while consumers wait for recourse from actual frauds) perhaps it’s time to let ordinary rules of protocol go by the wayside and speak out louder and sooner? Perhaps even with an amicus brief?
— Stuart Alderoty (@s_alderoty) October 27, 2023
Alderoty was joined by Deaton Law Firm founder John Deaton, who said the case would be won by someone with insider knowledge.
? Dissents and open letters of criticism are great and appreciated. Certainly, better than nothing. But maybe it is time to get off the sidelines and take that extra step and file an amicus brief. As you know, 75 thousand individual holders spoke up to have their voices heard in…
— John E Deaton (@JohnEDeaton1) October 27, 2023
In March 2021, the SEC filed a suit against LBRY. The agency accused the startup of selling unregistered securities in the form of the LBC token in an ICO of $11 million.
In November 2022, Judge Paul Barbadoro of the U.S. District Court for New Hampshire issued a ruling in favor of the regulator.
In May 2023, the SEC sought to reduce the civil penalty under the LBRY ruling from $22 million to $111,614. The Commission acknowledged that the project had insufficient funds to pay the initial amount and was close to ceasing operations.
In September, the startup made an attempt to revive the litigation with the SEC, but ultimately decided to shut down. According to the statement, obligations to authorities, the team of lawyers and private investors amounted to several million dollars.
As Gary Gensler is firmly convinced that cryptocurrencies are investment contracts, platforms issuing coins must register with the SEC.