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In recent updates, Ripple ally LBRY’s request that the court hear an oral argument for its motion to limit the SEC's remedies was granted, and the date was fixed for Jan. 30.
According to crypto lawyer John Deaton, who himself filed an amicus brief in the LBRY lawsuit, the Jan. 30 hearing regarding LBRY's motion to limit the SEC's remedies is arguably the most important crypto hearing to date.
The January 30th hearing regarding @LBRYcom’s Motion to Limit the SEC’s Remedies is arguably the most important crypto hearing to date.
— John E Deaton (@JohnEDeaton1) December 28, 2022
The SEC is seeking disgorgement from a non-party but also read the SEC’s proposed language for the permanent injunction. 👇 https://t.co/g6Bi0DdjYP pic.twitter.com/xpLsD1hI5x
He cites his reasons. According to him, a major issue is that the SEC is seeking disgorgement against a nonparty entity, which has huge implications and could set a very bad precedent.
Second, Deaton highlights the SEC's proposed language for the permanent injunction. He says this proposed language could theoretically allow the SEC to reach into the secondary market and disallow transactions from individuals who are only users of the platform and have never acquired LBC for investment reasons.
Third, the SEC is inappropriately seeking punitive disgorgement in a nonfraud case. The LBRY lawsuit, just like Ripple's, is a nonfraud case, but a Section 5 violation, which was the failure to register LBC sales.
Tomiwabold OlajideDeaton recalled that when the SEC won in the KIK case, it did not seek such disgorgement. He suggests that the SEC's action was punitive, as the agency claimed that all LBC token sales were profits.
Deaton adds that the language of the proposed permanent injunction, coupled with the SEC's absolute refusal to distinguish secondary market sales or even transactions by users, demonstrates the SEC's intent to expand its jurisdictional reach into the secondary market.
As reported by U.Today, the SEC requested a penalty equal to LBRY's full pecuniary gain of $22,151,971, stating that LBRY's gross receipts for its Section 5 violation amounted to the sum it received in return for its sale of 280 million LBC on trading platforms.
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