SEC Files Charges Against Abra for Failing to Register Crypto Asset Lending Product
Background
The US Securities and Exchange Commission (SEC) has filed settled charges against crypto lending firm Abra for failing to register its crypto asset lending product, Abra Earn. Additionally, the regulator also filed settled charges against Plutus Lending LLC, Abra’s owner, for operating as an unregistered investment company.
SEC Allegations
According to the SEC, Abra sold nearly half a billion dollars of securities to US investors without complying with registration laws designed to ensure that investors have sufficient, accurate information to make informed decisions before they invest. Abra began offering Abra Earn in the US around July 2020, and the program allowed investors to lend crypto assets in exchange for variable interest rates. The program reached approximately $600 million in assets, with nearly $500 million coming from US investors.
Abra’s Marketing and Operations
The SEC alleges that Abra marketed the product as a way for investors to earn interest “auto-magically” and used investors’ assets to generate income and fund interest payments. The complaint states that Abra Earn was offered and sold as a security without qualifying for an SEC registration exemption. Moreover, the SEC claims Abra operated as an unregistered investment company for at least two years, holding over 40% of its total assets in investment securities, including crypto asset loans to institutional borrowers.
Settlement
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.
Abra’s Previous Regulatory Issues
Abra has faced several regulatory issues in the past. On June 15, 2023, the Texas State Securities Board filed an emergency cease and desist order against Abra. The regulator accused the crypto firm of committing fraud by suggesting it was a “crypto bank” without having a Texas bank charter and without providing Federal Deposit Insurance Corporation deposit insurance.
Previous Settlements
Later in the same month, Abra settled with 25 US states to repay $82 million to its customers whose withdrawals were frozen. In exchange, the crypto firm avoided monetary penalties of $250,000 per jurisdiction. Additionally, Abra agreed to stop accepting crypto allocations from US customers as of June 15, 2023, and refund US customer balances.
Conclusion
The SEC’s charges against Abra highlight the importance of regulatory compliance in the crypto industry. Abra’s failure to register its crypto asset lending product and operate as an unregistered investment company has resulted in significant penalties and settlements. The case serves as a reminder to crypto firms to prioritize regulatory compliance and transparency in their operations.
FAQs
Q: What is Abra Earn?
A: Abra Earn is a crypto asset lending product offered by Abra that allows investors to lend crypto assets in exchange for variable interest rates.
Q: What are the SEC’s allegations against Abra?
A: The SEC alleges that Abra failed to register its crypto asset lending product, Abra Earn, and operated as an unregistered investment company.
Q: What is the settlement between Abra and the SEC?
A: 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.
Q: What are Abra’s previous regulatory issues?
A: Abra has faced several regulatory issues, including an emergency cease and desist order from the Texas State Securities Board and settlements with 25 US states.
Q: What does this case mean for the crypto industry?
A: The case highlights the importance of regulatory compliance in the crypto industry and serves as a reminder to crypto firms to prioritize transparency and compliance in their operations.
