SEC commissioner Peirce slams agency’s handling of LBRY case

• The remarks come after LBRY Inc. disclosed its decision to cease operations.
• Peirce stated that there is no clear path for companies like LBRY to register their functional token offerings.

In a candid and critical statement, Hester Peirce, a commissioner at the U.S. Securities and Exchange Commission (SEC), expressed her dissatisfaction with how the SEC handled charges against the crypto startup LBRY.

Peirce, known for her crypto-friendly stance, highlighted that despite the SEC’s claims of clarity in applying securities laws to token projects, the reality is quite the opposite.

LBRY, which was charged by the SEC with selling unregistered securities, recently announced its shutdown, further emphasizing the difficulties token projects face in navigating regulatory challenges.

Speaking out about the SEC’s actions, Commissioner Hester Peirce expressed her concerns, stating that there is no clear path for companies like LBRY to register their functional token offerings.

She noted that even if a company managed to register its token offering, it might not yield significant benefits. Peirce emphasized the importance of compliance for investors but voiced her doubts about the effectiveness of the current regulatory approach.

Criticism on lack of clarity in SEC’s approach

These remarks from Commissioner Peirce come after LBRY disclosed its decision to cease operations. The startup faced SEC charges for selling unregistered securities and had reportedly received over $11 million in U.S. dollars, Bitcoin [BTC], and services during its token offering.

In her statement, Peirce disclosed that she did not support bringing the case against LBRY but had been unable to express her concerns publicly while the case was ongoing.

LBRY initially pursued an appeal in the hope of reversing a judge’s decision that subjected its token to regulatory oversight, along with an order to pay over $111,614 in penalties.

However, the startup later changed its course and abandoned the appeal. As a result of mounting debts to the SEC, its legal team, and a private debtor, LBRY announced that its assets, including the Odysee platform, were being placed into receivership.

Additionally, all LBRY executives, employees, and board members resigned, intending to fulfill their outstanding legal obligations but nothing beyond that.

The July 2022 court ruling neither confirmed nor refuted whether LBRY’s token, LBC, qualified as a security.

Peirce pointed out that this uncertainty meant that the LBRY blockchain could continue to exist, albeit on a more challenging path. She criticized the SEC’s actions in this case, stating that they had forced a group of entrepreneurs to abandon their blockchain project.

In Peirce’s view, the disproportionate response to LBRY’s case could deter individuals from experimenting with blockchain technology, which the startup described as “technology that enables dissent.”