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Community reacts to SEC dropping XRP case and LBRY shutdown

20 Oct 2023
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Ripple’s latest win in its legal battle against United States securities regulators has been marred by news of the blockchain platform LBRY shutting down operations, which triggered the community to react.

The U.S. Securities and Exchange Commission (SEC) announced its intention to dismiss all claims against Ripple CEO Brad Garlinghouse and executive chair Chris Larsen on Oct. 19. The event marked a significant legal win for Ripple in the civil case filed by the SEC in late 2020.

On the same day, LBRY, a major blockchain file-sharing and payment network, announced the termination of its operations, citing “several million dollars” in debts owed to the SEC, its legal team and a private debtor. LBRY’s creators are known for building Odysee, an open-source video-sharing website that uses the network, aiming to bring a decentralized alternative to major video platforms like YouTube.

The SEC filed a lawsuit against LBRY in March 2021, accusing the firm of similar securities law violations to those it brought against Ripple. Even after the SEC downgraded the $22 million penalty against LBRY to around $111,000, the firm eventually decided not to continue its appeal against the SEC.

“Whilst we celebrate another massive win for Ripple, let’s not forget the damage the SEC has already done to crypto,” prominent XRP (XRP) influencer Ashley Prosper wrote on X (formerly Twitter) on Oct. 19. The crypto enthusiast expressed hope that the LBRY app and its eponymous native token would rise again due to the “rampant censorship on X and the ever-present censorship on YouTube.”

“As we celebrate today’s XRP ruling, a less successful outcome by a blockchain sued by the SEC went under the radar,” blockchain enthusiast Slorg noted in a thread on X. The poster said it is unfortunate that what was “once a successful Web3 startup with actual user adoption” is now defunct and non-existent. “Regulated into oblivion,” Slorg wrote.

Some social media commenters pointed out a significant difference between Ripple and LBRY in terms of their capital. XRP is the fifth-largest cryptocurrency by market capitalization, valued at $27 billion, while the LBRY credits’ market cap amounts to just about $5.5 million at the time of writing, according to data from CoinMarketCap.

“Ripple would have been LBRY if they didn’t have the funds to fight the SEC,” one X commenter wrote, arguing that the cases’ outcomes make a stark illustration of the way “rich establishments can use the courts to their advantage until they have to battle the big whales.”

According to pro-XRP lawyer John Deaton, the LBRY case highlights the consequences of the industry overreach by the SEC. Deaton criticized the SEC for picking on a small American company, which wasn’t proven to have committed fraud but failed to prevent major failures like FTX.

“After millions of dollars were wasted, the SEC got a $130K fine. This case alone proves the SEC is a broken, failed and inept agency,” Deaton stated.

Despite Ripple executives scoring a major legal win, its litigation with the SEC is far from being over, according to some industry observers.

Related: Crypto Twitter Hall of Flame: Pro-XRP lawyer John Deaton ‘10x more into BTC, 4x more into ETH

“Expect to see some more litigation in the penalty phase between the two parties in regards to the appropriate penalty for Ripple‘s $700M+ of institutional sales,” Fox News journalist Eleanor Terrett said on X, citing lawyers focused on the XRP case. According to Terrett’s sources, Ripple should expect a big fight as the SEC will still want a substantial amount for bragging rights.

In the Oct. 19 filing, the SEC mentioned that the SEC and Ripple would confer with respect to its Section 5 violations regarding its institutional sales of XRP. The regulator requested to propose a schedule for further litigation until Nov. 9, 2023.

Magazine: Crypto Twitter Hall of Flame: Pro-XRP lawyer John Deaton ‘10x more into BTC, 4x more into ETH