Crypto trading and lender Abra confirms agreement to settle charges leveled by SEC.
The US SEC revealed that it was filing charges against crypto investment firm Abra in a Monday update. The Securities and Exchange Commission (SEC) alleges that Abra, also identified as Plutus Lending LLC, allegedly facilitated unregistered offers and sold crypto asset securities.
The SEC accuses Abra of running an unregistered investment platform. The firm confirmed the charges involved in its Abra Earn service. The firm affirmed the agreement to settle the charges with an unspecified fine.
The Abra executive echoed the settlement agreement, adding that the Earn service termination was concluded in 2022. The spokesperson added that without admission of any wrongdoing, the firm vows to comply with the US securities laws.
Abra Settles Charges
Abra spokesperson ruled out the incident will harm consumers by the settlement or termination of Abra Earn. He added that the firm transferred assets belonging to the US Earn customers alongside the accrued interest to the Abra Trade accounts last year.
The firm assured the continuity of its existing operations in the country offered via Abra Capital Management – an SEC-registered entity that provides investment advisory.
The action undertaken by the SEC underscores the pattern where the securities watchdog targets major players within the crypto space. Often, crypto executives have alleged Gary Gensler-chaired SEC deploys regulation by enforcement.
Per the SEC’s complaint, Abra unveiled the Abra Earn product in July 2020, allowing US investors to deposit crypto assets. The firm promised to grant investors variable interest rates for their deposits. The complaint discloses that Abra Earn held $600 million at its peak, with US investors contributing nearly $500 million.
The associate director in the regulator’s Division of Enforcement, Stacy Bogert, revealed in a statement that Abra executed a nearly $0.5 billion sale of securities to US investors. The executive decried Abra’s noncompliance with the registration laws. It contravened the provisions to ensure the sufficiency and accuracy for investors to reach informed decisions.
In its complaint, the SEC alleges Abra marketed the Earn product as a means for the investors to reap interest auto-magically on the deposits. The court filing illustrates that Abra leveraged investors’ assets, exercising discretion in generating earnings for its benefits and funding interest payments.
The SEC contends the offerings by Abra constitute securities and are thus not exempt from the registration requirements. The regulator argues that Abra ran the unregistered investment operations for two years. During this time, the SEC claims Abra issued securities and held over 40% of the total assets net of cash in the investment securities.
Bogert indicated that the matter portrays that enforcement investigations are guided by economic realities rather than cosmetic labels.
The action against Abra coincides with the broader regulatory crackdown targeting Abra. In early 2024, Abra and its chief executive reached a settlement with regulators drawn from 25 US states regarding its unlicensed operations.
The agreement mandated Abra to refund $82.1 million to the customers hailing from the 25 states. In addition, Abra’s chief executive will reserve a five-year prohibition of participating in money and transmitter services.
SEC Enforcement Actions Against Crypto Firms
The charges against Abra on Monday underscore the Commission’s approach to regulating the crypto industry. The enforcement actions are evident in the high-profile lawsuits initiated against leading crypto exchanges, including Binance, Coinbase, and Kraken.
A notable case involves the charges brought against Ripple Labs in December 2020, claiming the XRP sales constitute an unregistered securities offering. The matter was resolved early this month when the New York court ruled that the fintech company should settle a $125 million fine.
The post-FTX collapse saw the SEC escalate efforts against crypto firms. In particular, the agency filed lawsuits against Coinbase and Binance in June last year, alleging they operated unregistered securities exchanges.
The SEC has hit other crypto service providers with enforcement actions. Crypto exchange Kraken had in February 2023 settled to a $30 million fine for offering an unregistered staking-as-a-service program. BlockFi paid a $100M settlement for its crypto lending product a year before the Kraken settlement.
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