Abra has settled with the SEC over charges related to the unregistered sale of securities through its crypto lending product, Abra Earn, and related violations by its parent company, Plutus Lending LLC.
SEC's Allegations and Settlement
In a significant regulatory development, crypto lending firm Abra has agreed to settle charges with the U.S. Securities and Exchange Commission (SEC) for operating its crypto asset lending product, Abra Earn, without proper registration.
The SEC’s charges stemmed from Abra’s operation of its yield-generating product, Abra Earn, which was launched in the United States in July 2020. The SEC also charged Plutus Lending LLC (PLL), Abra's parent company, with functioning as an unregistered investment entity.
The Abra Earn Situation
The Abra Earn platform allowed U.S. investors to earn interest on their cryptocurrency holdings, amassing nearly $600 million in assets, with over 80% of this capital sourced from U.S. investors. According to the SEC, Abra used these customer assets to generate income and fund interest payments while simultaneously offering securities that did not meet SEC registration requirements.
Stacy Bogert, Associate Director of the SEC’s Division of Enforcement, highlighted the severity of the violations, stating that Abra sold nearly half a billion dollars in securities without adhering to the laws intended to protect investors by ensuring transparency and accuracy in investment information. Bogert further criticized Abra for allegedly bypassing provisions of the Investment Company Act, which is designed to minimize conflicts of interest and provide essential protections to investors.
Abra’s Response
In response to the SEC’s actions, an Abra spokesperson confirmed that the company had settled the charges without admitting wrongdoing. The spokesperson also emphasized that no consumers were harmed by the settlement or the wind-down of Abra Earn. All assets, including accrued interest for U.S. customers, were reportedly transferred to Abra Trade accounts in 2023.
Abra’s Regulatory History
Abra has faced similar regulatory challenges in the past. In June 2023, the Texas State Securities Board issued an emergency cease and desist order against the firm, accusing it of fraudulently representing itself as a “crypto bank” without the necessary Texas banking charter or Federal Deposit Insurance Corporation (FDIC) insurance. The Texas regulator’s investigation also uncovered that Abra and its CEO, William “Bill” Barhydt, were insolvent or nearly insolvent as of March 2023.
Later that same month, Abra reached a settlement with 25 U.S. states to repay $82 million to customers whose withdrawals had been frozen. This settlement allowed Abra to avoid significant monetary penalties, which could have amounted to $250,000 per jurisdiction.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
