LBRY Closes Doors After $111K Securities Fraud Fine

After a federal judge in New Hampshire fined LBRY $111,614 for securities fraud, the company tweeted it was closing down. Its bespoke token LBC and its video-sharing technology once powered Odysee, a far-right-friendly video platform, The Guardian wrote.

More than $12M from illegal sales

Legal troubles began to brew for the firm in 2021, when the US Securities and Exchange Commission (SEC) claimed its cryptocurrency was an investment contract issued to help fund its operations and promotional efforts. According to the SEC, the company had raised $12.2 million illegally from LBC sales in the last five years.

At first, the SEC wanted to enforce a $22 million fine. This May, they adjusted it to $111,614 on account of LBRY’s “lack of funds and near-defunct status”.

Conceived as a “censorship-resistant” system

LBRY issued its cryptocurrency and launched its eponymous protocol using blockchain technology. This protocol was said to allow peer-to-peer content distribution without centralized moderation or oversight.

LBRY founder Jeremy Kauffman promoted it as a censorship-resistant system for publishing digital content in 2019. The company made an analogy between its activity and what “Bitcoin does to money.”

Odysee was to compete with YouTube

LBRY launched the video platform Odysee in 2020. Users could post and watch videos using the LBRY protocol easily. They could also support their favorite creators financially by purchasing LBC.

Odysee had some publication standards and insisted they would exclude any videos that failed to meet them. However, it appears these standards were somewhat lax. Then-VP of LBRY Julian Chandra wrote to employees in an email that “being a white nationalist or Nazi isn’t grounds for removal” in 2021.

Founder is a far-right politician

During the company’s history, Kauffman became increasingly involved in rightwing politics. Currently, he’s a member of the Free State Project, the Libertarian party’s far-right wing, which aims to encourage libertarians to move to New Hampshire and change the state’s government. He ran for the US Senate in 2022, telling a reporter he wanted “less democracy” in the US.