Abra and the SEC reach a settlement regarding unregistered securities, involving assets valued at $600 million and around $500 million from investors in the United States.
TakeAway Points:
- Abra and the SEC reach a settlement over unregistered securities; Abra will pay civil fines for the $600 million Abra Earn initiative.
- According to the SEC, Abra held more than 40% of its assets in investment securities and conducted business as an unregistered investment company.
- All US Earn client assets were transferred to Abra Trade accounts; therefore, no consumers suffered as a result of the settlement.
SEC settles with Abra
The U.S. Securities and Exchange Commission (SEC) has reached a settlement with crypto lending platform Abra, which was charged with selling unregistered securities and operating as an unregistered investment company. Plutus Lending LLC, doing business as Abra, agreed to the settlement without admitting or denying the allegations.
Abra will have to pay the fines that the court decides upon. Abra Earn is a programme that lets regular investors deposit cryptocurrency assets in exchange for interest. According to the SEC’s complaint, the program’s assets reached about $600 million at its peak, with almost $500 million coming from American investors.
Allegations and regulatory actions
As per the report, Abra was functioning as an unregistered investment company due to its exercise of discretion in investing consumer cash to generate high yields, as claimed in the SEC’s complaint. According to the complaint, Abra also possessed loans of cryptocurrency assets to institutional borrowers, accounting for more than 40% of its total assets, excluding cash.
The SEC’s Associate Director of the Division of Enforcement, Stacy Bogert, emphasized the gravity of the situation, stating, “As alleged, Abra sold nearly half a billion dollars of securities to U.S. investors without complying with registration laws designed to ensure that investors have sufficient, accurate information to make informed decisions before they invest.”
In June 2023, Abra began winding down the Abra Earn program and instructed U.S.-based customers to withdraw their assets. An Abra spokesperson assured that “no consumers were harmed at all by the settlement or winddown of Abra Earn. All assets for US Earn customers, including accrued interest, were transferred to their Abra Trade accounts in 2023.” Abra continues to operate in the U.S. through Abra Capital Management, an SEC-registered investment adviser.
Earlier regulatory concerns
According to the study, Abra has previously been the subject of regulatory inquiry. The Texas State Securities Board accused Abra of falsely representing itself as a “crypto bank” without a Texas bank charter and without offering deposit insurance from the Federal Deposit Insurance Corporation (FDIC) and issued an immediate cease and desist order against the company on June 15, 2023.
The Texas regulator also found that Abra and its CEO, William “Bill” Barhydt, were “collectively insolvent or nearly insolvent” as of March 31, 2023. Later that month, Abra settled with 25 U.S. states to repay $82 million to customers whose withdrawals were frozen, avoiding monetary penalties of $250,000 per jurisdiction. Additionally, on June 15, 2023, Abra promised to stop taking cryptocurrency allocations from United States consumers and to return any monies owed to them.
