Crypto company jokes about using garlic to ward off SEC

3 minute read

The seal of the U.S. Securities and Exchange Commission (SEC) is seen at their headquarters in Washington, D.C., U.S., May 12, 2021. REUTERS/Andrew Kelly

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  • The SEC accuses LBRY Inc of selling unregistered securities
  • The blockchain company said it's "done being nice" in the case

(Reuters) - LBRY Inc, a blockchain publishing company accused by the U.S. Securities and Exchange Commission of selling unregistered securities, tweeted on Wednesday that it is "done being nice" and that it would engage in "psychological warfare" as it fights the lawsuit.

"We do not respect the SEC," read the tweet, which attached a screenshot of a chat attributed to LBRY co-founder Alex Grintsvayg saying "lawyers told me its ok" to attend a deposition in the case "looking sharp but smelling awful, as a form of psychological warfare."

LBRY chief executive and co-founder Jeremy Kauffman told Reuters on Wednesday that the tweet was "partly a joke."

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"It is true that we don't like the SEC," he said.

And while Grintsvayg is scheduled to sit for a deposition, he did not in fact plan to "eat a plate of garlic for breakfast, then do some crossfit and not shower," as the tweet indicated, Kauffman said.

Grintsvayg had asked the company's lawyers about engaging in olfactory aggression, but they did not advise him to do so, Kauffman said, without specifying the lawyers involved.

An attorney at Perkins Coie, which represents LBRY, said on Wednesday that they did not instruct their client to take the actions described in the tweet.

Timothy McLaughlin of Shaheen & Gordon, which serves as local counsel for the case filed in New Hampshire, said he had no knowledge of the tweet.

Three hours after the initial tweet, LBRY tweeted that the SEC had asked for it to be taken down.

"Playing nice with the SEC for 4 years has gotten us absolutely nowhere," the company said in the thread. "We're done being nice to these monsters."

An SEC spokesperson denied the agency had asked for the tweet to be removed.

The SEC sued LBRY last year, alleging that it had been selling unregistered securities since 2016 in the form of digital assets called LBRY Credits. The credits currently have a market cap of $20.2 million, according to Coinbase. LBRY has denied the allegations.

LBRY said on its website that the SEC declined to settle the case on terms that would have allowed it to keep operating.

The company has argued it was targeted for selective enforcement amid thousands of other digital assets. U.S. District Judge Paul Barbadoro rejected that argument last month, saying the SEC had sued dozens of other crypto companies.

Trial in the case is scheduled for September.

The case is SEC v. LBRY Inc, U.S. District Court for the District of New Hampshire, No 1:21-CV-00260.

For the SEC: Marc Jones, Eric Forni and Peter Moores

For LBRY: John Dixon and Keith Miller of Perkins Coie; and William Christie and Timothy McLaughlin of Shaheen & Gordon

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Jody Godoy reports on banking and securities law. Reach her at jody.godoy@thomsonreuters.com