Blockchain-based file-sharing and payment network LBRY has lost a lawsuit to the United States Securities and Exchange Commission (SEC) over the sale of native LBC tokens as securities.
According to the federal court which ruled over the civil action, LBRY violated securities laws in the process of putting up LBC for sale without first registering with the U.S SEC.
Taking to Twitter, the defendant LBRY stated “We lost. Sorry, everyone. We’re going to lick our wounds for a little bit but we’re not giving up.”
The U.S regulator SEC indicted the crypto startup in March with a federal security violation charge. Specifically, the violation was against Section 5 of the Securities Act of 1933 but the blockchain-based file-sharing network argued against the claim.
Explicitly, LBRY mentioned that LBC tokens were not securities contrary to SEC’s claim. Instead, the LBC token “functions as a digital currency that is an essential component of the LBRY Blockchain.”
The startup also argued that the watchdog did not give it prior fair notice about federal securities law compliance for the sale of LBC. This, the startup referred to as a violation of its right to due process.
SEC Seek Summary Judgement on LBRY Case
However, U.S. District Judge Paul J. Barbado concluded the ruling by saying “no reasonable trier of fact could reject the SEC’s contention that LBRY offered LBC as a security, and LBRY does not have a triable defense that it lacked fair notice, the SEC is entitled to judgment.”
The LBRY project started in 2016 as a decentralized publishing platform but later the court discovered that the LBC token was an investment contract that was not offered through an Initial Coin Offering (ICO). Now that a verdict has been reached, LBRY founder Jeremy Kauffman speculates that the outcome would have an effect on the wider crypto industry.
The conclusion of the lawsuit is in accordance with SEC’s request for a summary judgment like it did together with Ripple Labs in its lawsuit with the blockchain payment firm. One of the SEC’s recent lawsuits is one against four individuals in connection with a crypto-themed Ponzi scheme dubbed Trade Coin Club.