US securities regulator has sought to drastically reduce the fine it asked the court to slam against LBRY, a blockchain-based file-sharing and payment network it sued in March 2021. The watchdog had alleged that the crypto startup’s native LBC tokens were unregistered securities.

Previously, the Securities and Exchange Commission (SEC) asked the court to fine LBRY $22 million for pooling $11 million from its unauthorized offering. However, in a court document filed on Friday, the regulator asked the court to reduce the amount to $111,614, noting it considered the firm’s argument that “it is defunct, ceasing operations, and without the funds to pay a larger fine.”

SEC Asks Court to "Enjoin" LBRY

Meanwhile, in the new court filing, the federal supervisor prayed that the court “enjoin” or issue an order warning LBRY against violating its provision that prohibits the offer or sale of securities without registration. It noted that this request should be granted at least until the firm “destroys its LBC holdings and dissolves, as it stated to the Court it will do.”

Explaining the reason for its request, the SEC argued that the file-sharing company’s alleged violation “was a continuous effort conducted over more than five years and continued well after this case was filed.” The US watchdog further claimed that LBRY’s conduct was “egregious” and “specifically intended to [affect] or alter the trading market for LBC.”

Furthermore, the SEC maintained that the firm has not recognized that its conduct was unlawful. It added that the crypto startup remains in a position to violate the country's securities registration law.

LBRY Calls SEC’s Action “Disastrous”

The SEC started investigating LBRY in May 2018 and filed a complaint against the company in 2021. In the complaint, the securities regulator accused LBRY of selling unregistered securities to retail and institutional investors between 2016 and 2021.

Finance Magnates reported that LBRY had promised investors that it would facilitate a secondary trading market for its tokens to enable them to cash out their holdings just as the demand for and the value of the tokens increase. Responding to the SEC's complaint, the company in a website write-up accused the SEC of “advancing an aggressive and disastrous new standard that would make all blockchain tokens securities.”

“Classifying all actively developed blockchain tokens as securities will be a bureaucratic nightmare for United States residents and businesses operating in the US,” LBRY wrote on the website, helplbrysavecrypto.com.