Mr. Deaton, a prominent legal figure, believes that the LBRY case should be taught in law schools across the country. This case, he believes, proves that the SEC is a broken, failed, and inept agency.”

What Happened to LBRY and How Did It Fall?

LBRY began as a self-funded project to create a decentralized digital content-sharing platform. In 2016, they introduced LBC, their native currency, for various uses on their platform. Unlike ICO tokens, LBCs were directly sold through their app, and they used them for various purposes, including employee compensation. Further, LBRY kept 400 million LBC tokens for itself. 

The SEC filed a case against LBRY in 2021, alleging that they sold LBC as an unregistered security. The legal battle involves injunctions, repayment, and penalties. 

On November 7, 2022, Judge Paul J. Barbadoro granted the SEC’s motion for summary judgment in their case against LBRY, Inc. Following the ruling on November 29th, LBRY’s founders took to Twitter to share the grim news. 

They stated that this ruling could spell the end of their platform, as the SEC intends to impose a fine of over $20 million, surpassing the $12.2 million they reportedly earned from the sale of LBRY tokens.

In a recent tweet, John E. Deaton called for the LBRY case to be taught in law schools across the country. This case, he believes, holds crucial lessons beyond just applying the Howey Test to modern blockchain technologies and cryptocurrencies.

Mr. Deaton says that instead of going behind high-profile cases involving bigger players in the crypto space like FTX, Celsius Network, and Voyager.

The SEC picked on a small American company based out of New Hampshire, threatened to bankrupt it during the investigation, and then proceeded to bankrupt it.

What makes the LBRY case particularly controversial is the absence of any proven fraud or misrepresentation. The majority of LBRY Credits (LBC) holders, in this case, were individuals using the platform, not traditional investors. The vast majority of LBC holders are actual users of the platform and not investors.

Despite millions of dollars spent on the case, the SEC’s pursuit ultimately resulted in a mere $130,000 fine. Deaton believes this case alone proves the SEC is a broken, failed, and inept agency.”

Mr. Deaton states, that he believes that this case alone proves the SEC is a broken, failed, and inept agency.

The LBRY case serves as a vivid example of the complexities and challenges that the SEC and other regulatory agencies face in their efforts to navigate this fast-evolving landscape.

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