Hester Peirce questions SEC enforcement action against LBRY

Hester Peirce has expressed concern over the SEC’s approach towards crypto enforcement, explicitly referencing the recent LBRY case.

Commissioner Hester Peirce of the Securities and Exchange Commission (SEC) on Oct. 27 shared her thoughts about the agency’s treatment of blockchain-based file sharing and payment network LBRY. 

In her statement, Peirce highlighted that LBRY had been singled out by the SEC despite it having a functioning blockchain with a real-world application. She decried the Commission’s role in the demise of LBRY following the company’s shutdown after failing to appeal the court decision that went against it.

“Are investors and the market really better off now after the Commission’s litigation contributed to the demise of a company that had built a functioning blockchain with a real-world application running on top of it?”

Hester Peirce, SEC Commissioner

The commissioner said the SEC was misaligned with its “misguided enforcement-driven approach to crypto.” She also condemned the regulator for not having a clear path mapped out for companies like LBRY to be able to register functional token offerings.

She argued that the SEC could have used the time and resources spent on the LBRY case to create clear regulations that would benefit the crypto sector instead of this blind blame game.

Columbia Business School professor Austin Campell echoed Commissioner Pearce’s sentiments and described the SEC’s conduct in the LBRY case as “wildly egregious” and a “national scandal.”

According to him, the SEC had a problem with how LBRY rolled out its native token. The company didn’t register it as a security. The Commission took punitive measures and demanded $44 million in fines, which Campbell felt was odd because there were no allegations or evidence of fraud.

Eventually, the court approved the fine but reduced it to $111,614. By then, it was too late. The damage was already done, and LBRY went bankrupt soon after.

Campbell went on to strongly advocate for a complete overhaul of the SEC’s leadership to allow rules more accommodating to innovations like blockchains rather than hindering them with what he considers outdated regulations.