The LBRY case judge has recently made a ruling on whether secondary cryptocurrency sales are considered to be securities.
Back in January 2023, attorney John Deaton had reportedly convinced the Judge in the US Securities and Exchange (SEC) vs. LBRY court case that secondary LBC crypto token sales would not qualify as a securities offering.
To quote the recent court filing:
“Because the SEC does not seek relief against third-party purchasers of LBC, I also decline both LBRY’s and the amici’s invitation to rule on whether LBC is itself a security. Simply put, that issue has not been litigated in this case. Accordingly, I take no position on whether the registration requirement applies to secondary market offerings of LBC by persons or entities that are not subject to the injunction pursuant to Rule 65(d).”
Fintech firm Ripple might now be concerned after a US district court judge declined to provide a ruling/decision on whether the secondary sale of LBRY Credits (LBC) should be considered a security.
On July 11, 2023, Judge Paul Barbadoro of the US District Court for the District of New Hampshire announced a ruling in the case that the US SEC had brought against LBRY, which is described as a “decentralized” content creation/publishing platform.
The ruling might have provided a type of legal precedent to district court Judge Analisa Torres, who will be making a decision regarding the SEC’s ongoing court case against Ripple in the following months.
As mentioned in the formal ruling, Barbadoro remarked:
“I take no position on whether the registration requirement applies to secondary market offerings of LBC.”
It’s worth noting that a secondary market allows traders to purchase and sell securities. Meanwhile, a primary market supports capital raising from the firm that is directly issuing the security.
Notably, Barabadoro made the decision to maintain his “judicial restraint,” Deaton added.
Barbadoro’s most recent opinion is different from what he decided as part of a January appeal hearing during which Deaton convinced him that the secondary sale of LBC digital tokens does not actually qualify as a type of securities offering.
The New Hampshire judge had noted in the appeal hearing that LBC may be a security if the sale had been carried out directly. The SEC acknowledged that secondary market LBC sales are not the same as a sale of a security.
Although the SEC had won a summary judgment in November last year, it decided to settle for $22 million at an appeal hearing that was held in January 2023.
In May of this year, the US regulator updated the figure and also requested the court to issue a penalty of $111,000, while noting that LBRY may not have had adequate funds and had a “near-defunct status.”
As covered last year, LBRY, a digital asset firm that was the target of a Securities and Exchange Commission (SEC) enforcement action, had predicted its own demise stating it will “probably be dead in the near future.”
As previously reported, in the Spring of 2021, the SEC filed charges against LBRY, alleging that issued digital assets were, in fact, securities.
According to the SEC’s complaint, between 2016 and 2020, LBRY allegedly sold over 13 million LBC tokens to the public via trading platforms. LBRY is said to have sold LBC for Bitcoin, then valued at $5 million. In total, the SEC alleges that LBRY received more than $11 million in U.S. dollars, Bitcoin, and services from purchasers who participated in its offering.
LBRY was a platform for content such as images and video etc., that sought to utilize its native token to operate a “free, and fair network for digital content.”
Late last year, a drawn-out legal battle with the SEC was lost as the judge handling the case determined that LBRY did “not have a triable defense.”
LBRY did state that it expects the LBRY mission to continue, but the company is doomed due to legal and SEC debts.