The U.S. Securities and Exchange Commission has filed a lawsuit against New Hampshire-based crypto startup LBRY Inc., accusing the company of selling unregistered securities in the form of its token.
LBRY operates a decentralized content publishing platform. According to the company, the firm's in-house tokens, dubbed LBRY Credits, are used as part of the platform to publish and buy content.
The SEC's lawsuit contends that LBRY Credits are securities and that the firm's sale of these credits constituted an unregistered offering to investors.
"According to the SEC's complaint, from at least July 2016 to February 2021, LBRY, which offers a video sharing application, sold digital asset securities called "LBRY Credits" to numerous investors, including investors based in the US," the SEC said in a statement published Monday. "The complaint alleges that LBRY did not file a registration statement for the offering, and that the offering failed to satisfy any exemption from registration."
The SEC further said that the firm "received more than $11 million in U.S. dollars, Bitcoin, and services from purchasers who participated in its offering." A copy of the complaint can be found here.
LBRY framed the lawsuit as a broader attack on the U.S. crypto industry, an approach that mirrors those taken by messenger app Kik and, more recently, distributed ledger firm Ripple.
"The Securities and Exchange Commission has filed a complaint against LBRY Inc alleging that all distributions of LBRY Credits by LBRY Inc are unregistered securities offerings," LBRY wrote in the FAQ section of a website it launched in the wake of the lawsuit's filing. "This claim is a tremendous threat to the entire cryptocurrency industry."
In the FAQ, LBRY indicated that it had been the subject of an SEC inquiry for three years.
"LBRY Inc has been preparing to fight this case for three full years, which is how long the SEC has been investigating this matter. We wanted to tell you sooner, but transparency in ongoing investigations is not welcomed by the SEC," the firm wrote.