The US Securities and Exchange Commission (SEC) recently took action against crypto lending firm Abra for failing to register its crypto asset lending product, Abra Earn. This failure to register led to the SEC filing settled charges against both Abra and its owner, Plutus Lending LLC, for operating as an unregistered investment company.
Stacy Bogert, Associate Director of the SEC’s Division of Enforcement, emphasized that Abra had sold nearly half a billion dollars of securities to US investors without following the necessary registration laws. This lack of compliance deprived investors of essential information needed to make informed decisions about their investments. Abra Earn was marketed as a means for investors to earn interest effortlessly, all while using investors’ assets to generate income and finance interest payments.
In addition to the SEC’s actions, the Texas State Securities Board issued an emergency cease and desist order against Abra on June 15, 2023. The regulator accused the crypto firm of fraudulent practices by portraying itself as a “crypto bank” without the proper Texas bank charter or Federal Deposit Insurance Corporation deposit insurance. The investigation further revealed that both Abra and its CEO were financially unstable during the inquiry.
Abra reached settlements with 25 US states to repay $82 million to customers whose withdrawals had been frozen. This agreement spared the crypto firm from financial penalties and required it to cease accepting crypto allocations from US customers as of June 15, 2023. Furthermore, the company agreed to refund US customer balances, demonstrating a willingness to rectify its wrongdoings.
The legal actions taken against Abra illustrate the importance of regulatory compliance and transparency within the cryptocurrency industry. By failing to register its crypto asset lending product and operating as an unregistered investment company, Abra jeopardized the financial well-being of its investors. The settlements and cease and desist orders should serve as a cautionary tale to other crypto firms looking to operate within the bounds of the law. Investors must conduct thorough due diligence before participating in any investment opportunities to ensure compliance and protection of their assets.