In recent developments, Abra, a prominent crypto lending firm, has come under scrutiny as Texas regulators accuse the company of securities fraud and claim it has been insolvent since March 31. The Texas State Securities Board issued an emergency cease and desist order against Abra and its founder, William Barhydt, while alleging deceptive practices related to investment product sales through its affiliates, Abra Earn and Abra Boost.
The Texas regulator filed a motion against Abra
Abra, founded by William Barhydt in 2014, facilitated trading, lending, and borrowing of crypto assets for retail and institutional investors. The firm reportedly managed approximately $116.79 million in assets for Abra Earn and Abra Boost investors in the United States as of May 17.
The Texas regulator alleges that Abra and Barhydt intentionally concealed financial information, including the capitalization of parties, loan defaults, and the transfer of assets to Binance. The board accuses Abra of misleading statements in the sale of investments in Abra Earn in Texas, which were likely to deceive the public.
Despite claiming in October 2022 that it would cease selling investments in Abra Earn, the Texas regulator asserts that Abra continued offering and selling investments in Abra Boost to accredited and institutional investors in the United States. These actions have raised concerns about the company’s compliance with regulatory requirements.
Insolvency and lack of transparency casts doubts on Abra’s financials
The Texas State Securities Board further alleges that Abra has been insolvent or near insolvent since March 31. However, an unnamed affiliate of Abra recently denied bankruptcy rumors on social media as of June 11, suggesting a lack of transparency and conflicting information.
Abra had announced plans in September 2022 to become the first U.S.-based bank accepting digital asset deposits, with a launch expected in early 2023. However, following the collapse of FTX in November of the same year, Abra began downsizing and restructuring to reduce overhead costs.
It is worth noting that Abra faced prior regulatory issues in July 2020 when the Securities and Exchange Commission and Commodity Futures Trading Commission fined the company $300,000 for offering “security-based swaps” to retail investors without proper registration and failing to transact those swaps on a registered national exchange.
As the investigation into Abra’s alleged securities fraud and insolvency unfolds, it raises concerns about the company’s financial practices, compliance with regulations, and the potential impact on investors. The situation emphasizes the importance of regulatory oversight and due diligence when engaging in the crypto lending and investment space.
