As a researcher with a focus on the intersection of finance and technology, I have closely followed the evolution of Abra and its regulatory challenges. The recent settlement with the SEC over unregistered sales of securities through Abra Earn is yet another chapter in their tumultuous journey.
As a researcher, I’ve come across information that indicates my focus, Abra, has resolved allegations from the SEC concerning the unregistered distribution of securities via our crypto lending service, Abra Earn, and infringements by our parent company, Plutus Lending LLC. This implies that we have addressed these issues in a way satisfactory to the SEC.
SEC’s Allegations and Settlement
In a substantial move concerning regulations, the cryptocurrency lending company Abra has consented to resolve allegations from the U.S. Securities and Exchange Commission (SEC), as Abra Earn, their crypto asset lending service, was found to be in operation without the necessary registration.
As an analyst, I find myself delving into the recent allegations against Abra and its subsidiary, Plutus Lending LLC (PLL). The crux of these charges stems from Abra’s management of its yield-producing product, Abra Earn, which was introduced in the U.S. market back in July 2020. Moreover, the SEC has also leveled charges against PLL for operating as an unregistered investment entity.
The Abra Earn Situation
On the Abra Earn platform, American investors could accumulate interest on their digital currency investments, amassing approximately $600 million in assets, where more than 80% of this capital came from U.S. investors. However, as stated by the Securities and Exchange Commission (SEC), Abra utilized these client resources to produce income and cover interest payouts while concurrently providing securities that failed to comply with SEC registration standards.
Stacy Bogert, an associate director at the SEC’s Division of Enforcement, emphasized the gravity of the offenses committed by Abra. She pointed out that Abra sold approximately $450 million in securities without following laws meant to safeguard investors by maintaining transparency and accuracy in investment data. Bogert also accused Abra of circumventing provisions within the Investment Company Act, a law designed to reduce conflicts of interest and offer robust investor protections.
Abra’s Response
As a researcher reporting on this matter, I can share that in response to SEC actions, an Abra representative has confirmed that the company chose to settle the allegations without admitting any wrongdoing. It’s important to note that this settlement and the winding down of Abra Earn did not result in harm to any consumers. Furthermore, all assets, including accrued interest for U.S. customers, were moved to Abra Trade accounts as early as 2023.
Abra’s Regulatory History
Previously, Abra encountered similar regulatory hurdles. In June 2023, the Texas State Securities Board took action against the company by issuing an emergency halt order. The accusation was that Abra had deceptively claimed to be a “crypto bank” without possessing the required Texas banking license or Federal Deposit Insurance Corporation (FDIC) protection. The investigation conducted by the Texas regulatory body further revealed that, as of March 2023, Abra and its CEO, William “Bill” Barhydt, were either bankrupt or on the brink of bankruptcy.
In the same month, Abra came to an agreement with 25 U.S. states to reimburse a total of $82 million to customers whose funds were previously frozen. This settlement spared Abra from potentially hefty financial fines, which could have reached up to $250,000 per location.
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2024-08-27 15:08