The US Securities and Exchange Commission (SEC) has submitted settlement of charges against crypto lending company Abra for failing to register its crypto asset lending product, Abra Earn.
In addition, the regulator also filed a settlement complaint against Plutus Lending LLC, Abra’s owner, for operating as an unregistered investment company.
Stacy Bogert, Associate Director of the SEC’s Division of Enforcement, stated:
“As alleged, Abra sold nearly half a billion dollars worth of securities to U.S. investors without complying with registration laws designed to ensure that investors have sufficient, accurate information to make informed decisions before investing. ”
Abra started offering Abra Earn in the US around July 2020. The program allowed investors to lend crypto assets in exchange for variable interest rates and reached approximately $600 million in assets – the majority of which, almost $500 million, came from US investors.
The SEC alleges that Abra marketed the product as a way for investors to “auto-magically” earn interest and used investors’ assets to generate income and fund interest payments. The complaint alleges that Abra Earn was offered and sold as a security without qualifying for an exemption from SEC registration.
Additionally, the SEC alleges that Abra operated as an unregistered investment company for at least two years and owned more than 40% of its total assets in investment securities, including crypto asset loans to institutional borrowers.
Abra has agreed to settle the charges without admitting or denying the allegations. The settlement includes an injunction against violating the registration provisions and civil penalties to be determined by the court.
Abra’s previous regulatory issues
On June 15, 2023, the Texas State Securities Board filed an emergency injunction against Abra.
The regulator accused the crypto company of fraud by suggesting it was a “crypto bank” without having a banking charter in Texas and without offering deposit insurance from the Federal Deposit Insurance Corporation.
In addition, the Texas regulator claimed to have discovered that Abra and its CEO, William “Bill” Barhydt, “were collectively insolvent or nearly insolvent” at the time of the investigation on March 31, 2023.
Later that same month, Abra settled with 25 US states to refund $82 million to its customers whose withdrawals were frozen. In return, the crypto company avoided fines of $250,000 per jurisdiction.
Additionally, Abra agreed to stop accepting crypto allocations from US customers and to refund US customer balances starting June 15, 2023.