Blockchain file-sharing and payment network, LBRY, recently made a heartbreaking announcement regarding the termination of its operations. The company cited significant debts owed to various entities, including the SEC, its legal team, and a private debtor. In a final message to the crypto community on its video-sharing website Odysee and X, LBRY expressed its gratitude for the support received over the years and acknowledged the inability to continue operations due to mounting financial challenges.
LBRY revealed that it owed several million dollars in debts to the SEC, its legal team, and a private debtor, which it could no longer afford to pay. Despite this difficult situation, the company ensured that all of its executives, employees, and board members had resigned and are committed to fulfilling their legal obligations. Additionally, LBRY informed the community that its assets, including its flagship application Odysee, are now under the supervision of the financial regulator.
LBRY’s decision to cease operations is a result of a legal conflict with the SEC. After a court ruling in favor of the SEC in November 2022, LBRY previously announced its intention to wind down its operations entirely. However, in a surprising turn of events, LBRY filed an appeal against a regulatory authority, raising questions about a potential change in direction. This unexpected move prompted speculation and curiosity within the community.
SEC Lawsuit and Legal Battle
The SEC initiated a lawsuit against LBRY in March 2021, accusing the company of selling unregistered securities. The lawsuit alleged that LBRY Credit token (LBC) qualified as a security under the 1933 Securities Act. The SEC had been investigating LBRY for three years and deemed the LBC as a security. The lawsuit outcome in November 2022 favored the SEC, and the presiding judge ruled in favor of the SEC’s claims.
In response to the SEC’s complaint, LBRY resisted by stating that the lawsuit had broader implications for the cryptocurrency industry, potentially classifying most tokens as securities. The SEC had initially requested a total penalty of $44 million, but considering LBRY’s financial difficulties and near-defunct status, the court reduced the fine to $111,614.
Despite the legal battle, LBRY received support from individuals within the crypto community and notable figures in the blockchain industry. XRP lawyer John Deaton criticized the SEC’s actions against LBRY, highlighting the regulatory overreach and the impact on a small American company. Deaton stressed the importance of including the LBRY case as a case study in law school curricula.
Community Support and Gratitude
Following LBRY’s announcement of its termination, community members displayed their unwavering commitment to supporting Odysee and its open-source blockchain network. Despite LBRY’s challenges, the crypto community has demonstrated resilience and come forward to express their continued support for the LBRY team.
Individuals within the community expressed their gratitude towards LBRY for their determined efforts and regarded the LBRY network as valuable. Ripple’s Chief Technology Officer, David Schwarz, also shared his disappointment with LBRY’s situation. As the now-former CEO of LBRY, Jeremy Kauffman reflected on the company’s eight-year presence in the cryptocurrency industry, stating, “It wasn’t a happy ending, but it was a happy journey.”
