YouTube's decentralized version LBRY faces interception! SEC alleges: Unregistered securities issuance

LBRY, which was previously highly recommended by YouTuber Hao Hsiao-Ke, has switched to a new platform and is now facing a lawsuit from the U.S. Securities and Exchange Commission (SEC), accusing the company of conducting token issuance in the form of unregistered securities.

What is LBRY?

Decentralized YouTube

LBRY is a content publishing platform known for its decentralized version of YouTube. The early product, LBRY.TV, will be phased out, and the primary platform is now odysee.com, which offers desktop and mobile applications.

LBRY Credits

Its token is called LBRY Credits, serving as a medium for platform revenue sharing, content publishing, purchasing, and viewing. The total supply is 1 billion, with the following allocation:

• 10%: Marketing, strategic partnerships
• 10%: Operating costs
• 20%: Adoption incentive programs
• 60%: Mining rewards

Critics have pointed out that this means the official team initially controlled around 40% of the total circulating supply of the token.

SEC: Issued Proceeds Exceeding $11 Million

According to a statement from the SEC, LBRY violated Section 5 of the 1933 Securities Act, asserting that LBRY Credits fall under the category of securities. The unauthorized issuance constituted the sale of unregistered securities, leading to civil penalties. The SEC stated:

Since July 2016, LBRY has sold digital asset securities called LBRY Credits to numerous investors, including U.S. citizens, without submitting a registration statement for the issuance. This issuance mechanism did not qualify for any registration exemptions and resulted in proceeds exceeding $11 million worth of Bitcoin, services, and U.S. dollars.

Official Response

LBRY emphasized that even if the lawsuit leads to the company's closure, LBRY will continue to develop based on its decentralized network maintained by the community. The team has been preparing for the lawsuit for three years.

LBRY believes the root cause is excessive regulation by the SEC. While the SEC did not charge any individuals, the following token transactions were deemed sales of unregistered securities:

• Selling $10,000 worth of tokens to the exchange Shapeshift in July 2016 for distribution to its users
• Selling hundreds of thousands of dollars worth of tokens to blockchain developer Flipside Crypto in 2017 and 2018
• Millions of dollars in sales on exchanges over several years

LBRY claims that comprehensive and transparent sales reports have been published on the official website, although they were created using Google Forms, which may be considered less rigorous.

LBRY emphasized that they have been under SEC investigation since May 2018 for three years, stating that the SEC arrogantly repeatedly demanded costly documents from the team. They expressed:

The SEC has been aware of all relevant facts since 2018. LBRY is glad to bring this painful process to an end and express our position to the public and the court, although the lawsuit may not be resolved this year.

At the end of last year, YouTuber HAO HAO XIAN mentioned a gradual transition to LBRY, and Twitter announced the permanent suspension of Donald Trump's account on January 9, drawing public attention back to decentralized content platforms.

From a user experience standpoint, despite YouTube's ongoing issues with ads, LBRY faces more severe latency problems, making video viewing experience quite poor. Unless users embrace the grand vision of decentralization, they may find this viewing experience hard to accept.