The US Securities and Exchange Commission (SEC) recently filed charges against Abra for its failure to register its crypto asset lending product, Abra Earn. The regulator also brought charges against Plutus Lending LLC, the owner of Abra, for operating as an unregistered investment company. Stacy Bogert, Associate Director of the SEC’s Division of Enforcement, pointed out that Abra sold nearly half a billion dollars of securities to US investors without complying with registration laws.
Abra began offering the Abra Earn program in the US in July 2020. The program allowed investors to lend crypto assets in exchange for variable interest rates. It amassed around $600 million in assets, with the majority coming from US investors. The SEC alleges that Abra marketed the product as a way for investors to earn interest easily and used investors’ assets to generate income and fund interest payments. The complaint highlights that Abra Earn was sold as a security without meeting SEC registration requirements.
The SEC claims that Abra operated as an unregistered investment company for over two years, holding a significant portion of its assets in investment securities, including crypto asset loans. Abra has agreed to settle the charges without admitting or denying the allegations. The settlement includes an injunction against violating registration provisions and civil penalties to be determined by the court.
Apart from the SEC charges, the Texas State Securities Board took action against Abra by issuing an emergency cease and desist order. The board accused Abra of fraudulently presenting itself as a “crypto bank” without the necessary charter and insurance. The investigation conducted by the Texas regulator found Abra and its CEO to be financially unstable. Subsequently, Abra settled with 25 US states to repay $82 million to customers whose withdrawals were frozen. The settlement also involved Abra halting the acceptance of crypto allocations from US customers and refunding their balances.
The legal troubles faced by Abra shed light on the importance of regulatory compliance in the crypto industry. It serves as a reminder for companies to adhere to laws and regulations to protect investors and uphold the integrity of the market.