Crypto Platform Abra Agrees to Pay Fine from Charges Filed by U.S. SEC

Abra, a cryptocurrency trading and lending platform, settled with the U.S. Securities and Exchange Commission (SEC) over charges related to unregistered securities offerings and operating as an investment company with no proper licenses.

What’s the significance: The settlement shows the increasing regulatory scrutiny on cryptocurrency platforms, highlighting the importance for investors to choose compliant and transparent firms.

Key Details: 

• Accusations: The U.S. SEC accused Plutus Lending LLC, also known as Abra, of functioning as an unregistered investment company while offering unregistered crypto asset securities.
  • The Commission is responsible for requiring firms to comply with registration laws to ensure investor protection and transparency in securities offerings.
• What’s with the complaint? The complaint by the U.S. SEC emphasized that for at least two years, Abra operated as an unregistered investment company because it issued securities and held more than 40% of its total assets, excluding cash, in investment securities, including loans of crypto assets to institutional borrowers.
  • Abra investors included Amex Ventures, Blockchain Capital, and the Stellar Development Foundation.
• What Abra product is illegal? Abra’s Earn Service, which allowed investors from the U.S. to deposit crypto assets at variable interest rates, was also found by the regulator to be illegal.
  • The SEC alleged that Abra marketed the product as a way for investors to earn interest on crypto assets, using investors’ funds to generate income and fund interest payments.
• The violations: The US Commission criticized the firm for bypassing investor protection laws and the Investment Company Act.
• Penalty: The settlement involves a fine and addresses issues related to Abra’s now-defunct Abra Earn service.

Key Quote: 

“As alleged, Abra sold nearly half a billion dollars 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 they invest.”

Stacy Bogert, Associate Director, U.S. SEC’s Division of Enforcement

The numbers: Abra Earn managed around $600 million in assets at its peak, with $500 million from U.S. investors. 

• The product began to wind down in June 2023 and told customers to withdraw their assets.

However, despite the charges, Abra stated that no consumers affected, and U.S. Earn customers’ assets were transferred to their Abra Trade accounts in 2023:

“Without admission of wrongdoing, PLL agrees to continue to comply with securities laws. No consumers were harmed at all by the settlement or wind down of Abra Earn… All assets for the U.S. Earn customers including accrued interest were transferred to their Abra Trade accounts in 2023. Abra continues to operate in the USA via Abra Capital Management, an SEC-registered investment advisor.”

Previous regulatory actions against Abra: Earlier in 2024, Abra also settled with financial regulators from 25 U.S. states, agreeing to refund up to $82.1 million to customers, and its CEO faces restrictions on business activities for five years.

Worth reading: BitPinas has covered the activities of Abra since 2017. Check this timeline: 

• October 2017: Abra secured $16 million after completing Series B round of funding. 
• November 2017: Abra started allowing users to have three wallets at a time. 
• December 2017: Abra started supporting $ETH.
• March 2018: Abra announced support for 20 cryptocurrencies.
• May 2018: Abra supported five more tokens.
• September 2018: Abra allowed direct deposit and withdrawals to Bitcoin Cash and supports three more tokens. 
• October 2018: Abra started supporting Bitwise 10 Crypto Index Token (Bit10), allowing people to have exposure to more tokens when they acquire this particular coin.
• February 2019: Abra to launch a feature that will allow users to invest in stocks and other non-crypto financial instruments.
• April 2019: Abra officially launched the feature, but only for U.S. Stocks, like Netflix, Apple, and Amazon. 
• June 2019: Abra revealed Tesla is the most popular stock available. 
• October 2019: Abra increased U.S.-based bank transfer limits. 
• November 2019: Abra added support for more than 200 tokens. 
• June 2023: Abra suspended all retail services in the U.S. due to fraud allegations and regulatory pressures, while continuing its institutional and international operations, including a presence in the Philippines.
  • Abra has been accessible in the country since 2017.

What to watch: Following the SEC’s regulatory actions against other cryptocurrency firms, such as Kraken, Binance, and Coinbase, it suggests that similar enforcement could continue, prompting more firms to ensure compliance with U.S. securities laws.

For more prior news about Abra, check here.

This article is published on BitPinas: Crypto Platform Abra Agrees to Pay Fine from Charges Filed by U.S. SEC

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