Abra Settles With U.S. SEC Over Alleged Sales of Unregistered Crypto Securities

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As a seasoned researcher with years of experience navigating the complex world of finance and regulation, I find it intriguing to witness the ongoing saga of Abra Lending LLC. The SEC’s latest action against the company for failing to register its crypto asset lending product is yet another chapter in this compelling story.

On August 26th, the U.S. Securities and Exchange Commission (SEC) revealed they had filed charges against Plutus Lending LLC, operating as Abra, for not registering their retail crypto lending product, Abra Earn, prior to offering and selling it. Additionally, the SEC claims that Abra was functioning as an unregistered investment company.

As per the SEC’s accusation, Abra initiated the sale of Abra Earn in July 2020, with the claim that it let U.S. investors earn fluctuating returns using their cryptocurrencies. The SEC contends that Abra advertised Abra Earn as a method for “automatically” earning interest by secretly utilizing crypto assets in diverse manners to generate income and cover interest payments. The SEC argues that these operations classified Abra Earn as a security under U.S. law, and the offers and sales did not meet the criteria for any exemption from SEC registration obligations.

The Securities and Exchange Commission (SEC) claims that Abra functioned as an unregistered investment firm for a minimum of two years. This is alleged to be in breach of the Investment Company Act because more than 40% of its non-cash assets were invested in securities, such as crypto loans given to institutional lenders. In June 2023, the SEC pointed out that Abra initiated the process of closing down the Abra Earn program and urged U.S. customers to withdraw their digital currencies.

Stacy Bogert, an Associate Director at the SEC’s Enforcement Division, declared that Abra sold approximately $400 million in securities to American investors without adhering to registration regulations meant for investor protection. Furthermore, Bogert highlighted that Abra bypassed essential safeguards outlined under the Investment Company Act, which are set up to reduce potential conflicts of interest and secure investors.

The SEC’s complaint, filed in the U.S. District Court for the District of Columbia, charges Abra with alleged violations of Sections 5(a) and 5(c) of the Securities Act of 1933 and Section 7(b) of the Investment Company Act of 1940. Abra has settled the charges by agreeing to an injunction against further violations of these laws and to pay civil penalties, the amounts of which will be determined by the court.

Abra is a worldwide service that specializes in prime digital asset services and wealth management, mainly targeting institutional clients as well as wealthy individuals. Initially recognized for its retail cryptocurrency trading, Abra has since redefined its focus and functions more like a private wealth management platform for private clients, family offices, and large-scale investors. The company provides multiple services such as asset management, lending, staking, and treasury management through its platforms, Abra Prime and Abra Private.

Abra’s offerings are designed for individuals seeking to diversify into digital currencies like Bitcoin, Ethereum, Solana, and more. The focus is on handling extensive investment portfolios, crafting personalized investment plans, and providing OTC trading options.

Over the past few years, Abra has been under close examination by regulatory bodies. For instance, the Texas State Securities Board and other state authorities have leveled charges against them for alleged infractions such as functioning without proper licenses and insolvency problems. Yet, they persist in operation and have managed to resolve several legal conflicts through negotiations.

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2024-08-26 22:05