However, unlike other cases, LBRY did not conduct an ICO. Rather, the SEC sued LBRY when it sold its “pre-mined” LBC tokens in the secondary market to fund its operations and further develop the network. 

The Court stated: 

“What the evidence in the record discloses is that LBRY promoted LBC as an investment that would grow in value over time through the company’s development of the LBRY Network.” 

Post-ruling, LBRY Founder Jeremy Kauffman said: 

“The SEC vs LBRY case establishes an extraordinarily dangerous precedent that threatens the entire US cryptocurrency industry. Under the SEC vs LBRY standard, almost every cryptocurrency, including Ethereum and Doge, are securities. The future of cryptocurrency in the US now rests in with an organization even worse than the SEC: the United States Congress.” 

At the Mainnet conference in September, Kauffman wore a t-shirt that said “Fuck the SEC.” 

“The facts in this case apply to basically every company in this room,” Kauffman said during an interview at the time. “The SEC has very much demonstrated that they are out to damage or destroy the cryptocurrency industry in the United States.”

Kauffman is running for Senate in New Hampshire, because in his view, crypto proponents getting into politics is “the only way we can make blockchain legal.” 

Andrew Rossow, an attorney and adjunct law professor, stated that while the court’s ruling incorporated the Howey Test – which helps define what is and isn’t a security in the United States – it “missed the mark” in a key area. 

“The Court missed the mark in identifying a distinction that possibly speaks to a further clarification of what a ‘reasonable expectation of profits’ means under Howey, as it applies to projects such as LBRY,” Rossow said. 

“That distinction separates what I believe to be LBRY’s recognition that it is a ‘work in progress,’ and while it does want to see its investors make a return on their investment, that the only way that will happen is if others believe the project to have the utility as the company has presented it.” 

“I believe that distinction is fairly visible in that investors were encouraged to hold onto their LBC–despite the unlikelihood for them to make a ‘quick buck,’” he continued. 

LBRY’s token in question, LBC, is down 35% in the past day and 49% over the past 30 days, according to CoinGecko data. 

Per the ruling, a “status conference” is to be scheduled to further settle “any remaining issues” regarding the SEC vs. LBRY case. 

As Kauffman and LBRY have speculated, the ruling may very well set a precedent and be applied to other existing and future SEC cases involving cryptocurrencies. Ripple could be among those impacted, Rossow suggested, as the company has been engaged in an ongoing battle against the SEC since 2020. 

“[It adds], in my opinion, an interesting distinction that speaks to further clarifying what a ‘reasonable expectation of profits’ means in today’s landscape, as it pertains to projects that hold themselves out as a ‘work in progress,’” he said, “and the frequency by which that message is communicated to investors prior to and throughout their investment.” 
“Whether or not the SEC sees or understands that distinction is another question entirely,” Rossow concluded.

US Seizes 50K Bitcoins From Decade-Old Silk Road Hack

As a part of an investigation into the whereabouts of Silk Road founder Ross Ulbricht’s missing BTC, the US Attorney’s office has discovered and seized more than 50,000 bitcoin after conducting a raid at an address in Georgia contracted with 32-year-old computer science graduate James Zhong. 

Zhong had defrauded Silk Road out of more than 53,000 Bitcoin back in 2012. According to court filings, Zhong had created a string of Silk Road accounts to conceal his identity and triggered 140 transactions in quick succession to trick the platform into releasing Bitcoin into those accounts. 

Damian Williams, US Attorney for the Southern District of New York, stated: 

“For almost ten years, the whereabouts of this massive chunk of missing Bitcoin had ballooned into an over $3.3 billion mystery. Thanks to state-of-the-art cryptocurrency tracing and good old-fashioned police work, law enforcement located and recovered this impressive cache of crime proceeds.” 

Zhong was arrested and pleaded guilty to wire fraud last week. 

Prosecutors say 50,000 bitcoin were found in an underground safe and a single-board computer in a popcorn tin under a pile of blankets in Zhong’s bathroom closet. He has subsequently surrendered over 1,000 more bitcoin, and has agreed to help prosecutors access the remaining coins and provide the technical assistance to do so.