Regulated to oblivion. Blockchain startup LBRY shuts down after SEC battle

The developer of the decentralized media platform Odysee — the startup LBRY — announced it would cease operations, citing “multi-million-dollar debts.” Users drew comparisons with Ripple.

LBRY Inc. is winding down.

The LBRY network is unaffected.

Odysee and other assets will undergo a legal process to satisfy debts, but Odysee has a bright future ahead.

Thank you to everyone who fought with us for online freedom.

A final goodbye post is in the first reply.

— LBRY ? (@LBRYcom) October 19, 2023

“We’re winding down. The LBRY network is not affected. Odysee and other assets will undergo a legal process to satisfy debts, but the platform has a bright future ahead. Thank you to everyone who fought with us for online freedom,” the team wrote in a farewell tweet.

In March 2021, the U.S. Securities and Exchange Commission (SEC) filed suit against LBRY. The regulator accused the startup of selling unregistered securities in the form of the LBC token as part of the ICO for $11 million.

In November 2022, Judge Paul Barbadoro of New Hampshire handed down a ruling in favour of the regulator.

In May 2023, the SEC moved to reduce the civil penalty on the LBRY verdict from $22 million to $111,614. The Commission acknowledged that the project had “insufficient funds” to pay the initial amount and was “near to winding down the business.”

In September, the startup made an attempt to revive the litigation with the SEC, but ultimately decided to close. According to the statement, liabilities to authorities, the legal team and private investors amounted to “several million dollars.”

To satisfy these obligations, external managers are drawing on the startup’s assets (including Odysee), but this does not affect the LBRY blockchain as a decentralised open-source product, the team stressed.

Throughout the SEC proceedings, the platform continued to publish content. According to CoinGecko, Odysee’s monthly audience was about 5.3 million unique users. This was the highest figure among decentralized social media.

In LBRY noted that around 30 million items of content posted would continue to exist as blocks are mined on the network.

The startup team rejected any further proceedings with the SEC. Immediately after the statement’s release, the entire LBRY leadership stepped down.

“It wasn’t a happy ending, but it was a happy journey,” summed up the former CEO Jeremy Kauffman.

it wasn’t a happy ending, but it was a happy journey pic.twitter.com/BxLPVdi2DR

— Jeremy Kauffman ? (@jeremykauffman) October 19, 2023

Observers noted that LBRY’s shutdown coincided with another Ripple victory in its lawsuit with the SEC. The regulator declined to press charges against co-founder Chris Larsen and CEO Brad Garlinghouse for securities-law violations.

“Ripple would have been in LBRY’s place if it hadn’t had the resources to fight the SEC,” acknowledged by one XRP community member.

As we celebrate today’s XRP ruling, a less successful outcome by a blockchain sued by the SEC went under the radar.

Today LBRY Inc shut down:

1⃣ Background

LBRY set out to become a decentralized, open-sourced digital content platform.

In 2016 they released a token that would… pic.twitter.com/MVgPQbdXxQ

— Slorg (@SlorgoftheSlugs) October 20, 2023

Describing the saga of the startup’s litigation with the regulator, he concluded:

“Regulated to oblivion.”

The expert noted that LBRY had attracted millions of users to its content platform, but XRP’s market capitalisation was “much larger” than that of the startup’s token. A lack of resources doomed the project, Slorg conceded.

“Ripple would have been in LBRY’s place if it hadn’t had the resources to fight the SEC,” — acknowledged by one XRP community member.

A community representative using the alias Ashley PROSPER urged not to forget the damage the SEC has already inflicted on the crypto industry.

#XRP #XRPCommunity
Whilst we celebrate another massive win for Ripple, let’s not forget the damage the SEC has already done to crypto. @LBRYcom has decided not to continue its appeal against the SEC and shut its doors for good today. However, with the rampant censorship on X and… https://t.co/66tOS8L7Z7 pic.twitter.com/6hr3GL6qpi

— Ashley PROSPER (@AshleyPROSPER1) October 20, 2023

“Given the rampant censorship on X and YouTube, I have a faint suspicion that the LBRY app and token will be revived… the phoenix will rise from the ashes,” he added.

As reported in September, the Web3 social network Voice from Block.one announced it would wind down operations. The platform, which had faced no regulatory complaints, cited “uncertainties in the cryptocurrency market and NFTs.”