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Dead at dawn? LBRY's parent company to shut down due to inability to repay debts to SEC and others.

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After a two-and-a-half-year legal battle, LBRY Inc. fell in the darkness before dawn.

Table of Contents:

· After two and a half years of litigation, fluctuating situation, and high debt, LBRY Inc. ultimately chose to liquidate

· Tug of war with SEC: LBRY Inc. fell, Ripple won

October 20th, decentralized file sharing network LBRY announced that its parent company, LBRY Inc., will be shutting down, but the LBRY network will not be affected. In its press release, LBRY Inc. stated that it "has debts that it cannot repay to the SEC, its legal team, and private debtors." Assets, including Odysee, are undergoing bankruptcy management. The lbry.com domain, LBRY social media handles, GitHub, and all other assets will be used to repay debts. In addition, all LBRY Inc. executives, employees, and board members have resigned.

Two and a half years of litigation, fluctuating situation, and high debt, LBRY Inc. ultimately chooses liquidation

After more than two and a half years, LBRY Inc. has finally succumbed to the heavy regulatory pressure from the SEC.

In March 2021, the SEC sued LBRY Inc., claiming that the LBC tokens it issued were securities. However, the startup sold the tokens without registering with the SEC, violating securities laws. Later in November 2022, a judge in New Hampshire ruled that LBRY Inc. had violated securities laws. LBRY Inc. then fought back, claiming that the LBC tokens were not securities and that the SEC had not notified LBRY Inc. that selling LBC tokens would require compliance with securities laws, thus violating the company's due process rights.

December 2022, LBRY Inc. posted on social media that the company has been "strangled by US law and debt" after losing to the SEC, and that "although the LBRY protocol and blockchain will continue to exist, LBRY Inc. must die." Subsequently, some projects began to remove LBRY. In December, multi-chain routing protocol pNetwork announced that it will delist multiple projects including LBRY. LBRY Inc. CEO Jeremy Kauffman said that the expected fine from the SEC will be $20 million.

Despite LBRY Inc.'s apparent defeat in the lawsuit against the SEC, in a LBRY Inc. v. SEC appellate hearing in January of this year, the SEC acknowledged that the sale of LBC tokens on the secondary market does not constitute a security, and the judge stated that the injunction does not apply to sales on the secondary market. This also means that the SEC has reached a settlement with LBRY Inc.

However, this does not mean that LBRY Inc. has won the lawsuit. In May, according to court documents, the SEC sought to modify its $22 million penalty against LBRY Inc., requesting that the court impose a civil fine of $111,614. The SEC believes that LBRY Inc. has ceased operations and does not have the funds to pay a higher fine, hence the decision to lower the penalty amount.

SEC's legal document targeting LBRY

7 月, LBRY Inc. announced that "based on court orders and its own commitments, it is expected to liquidate LBRY Inc. in the next few months. Currently, there are 30 million pieces of content and 1.7 million on-chain identities on the LBRY network."

However, LBRY Inc. does not seem to intend to go quietly into liquidation, so it hopes to appeal this case to a higher court. On September 8th, according to a legal document shared by former US federal prosecutor James K. Filan on social media, LBRY Inc. has issued a notice of appeal and plans to appeal the SEC's charges of violating securities laws to the US First Circuit Court of Appeals. September 8th.

Legal documents shared by James K. Filan

However, this did not save LBRY Inc. from the outcome of liquidation. In a press release issued by LBRY Inc. today, the company announced that it will not continue to appeal the case against the SEC. This also marks the official end of the two-and-a-half-year legal battle between SEC and LBRY Inc.

Struggle between LBRY Inc. and SEC: LBRY Inc. collapsed, Ripple won

In the encryption industry, the tug-of-war with the SEC is not only happening to LBRY Inc. In fact, as the SEC's regulation of the encryption industry becomes increasingly strict, it is rare to win in a tug-of-war with the SEC. However, coincidentally, on the same day that LBRY Inc. announced its official closure, another company in the encryption industry, Ripple, announced that it had won in its tug-of-war with the SEC.

On December 22, 2020, the SEC officially filed a lawsuit against cryptocurrency company Ripple Inc. According to the SEC website, Ripple and its CEO Brad Garlinghouse and co-founder Chris Larsen are accused of "raising over $1.3 billion through an unregistered digital asset securities offering that began in 2013, such as labor and market-making services."

And today, three years later, on October 20th, according to Businesswire, Ripple announced that the SEC has dropped all charges against Ripple CEO Brad Garlinghouse and Executive Chairman Chris Larsen. Previously, in July 2023, the SEC ruled that "XRP (the token issued by Ripple) itself is not a security".

Subsequently, Ripple's Chief Legal Officer Stuart Alderoty posted on social media that "the SEC made a serious mistake in charging Brad & Chris individually. They have now surrendered, dismissing all charges against our executives. This is not a settlement. This is the SEC's surrender."

Regarding the comparison between the outcomes of LBRY Inc. and Ripple, many members of the community also feel very regretful, believing that LBRY Inc. fell in the darkness before dawn.