Abra Settles with SEC Over Unregistered Securities Sales

By: Eliza Bennet

The US Securities and Exchange Commission (SEC) has filed settled charges against crypto lending firm Abra for failing to register its crypto asset lending product, Abra Earn.

Additionally, the regulator also filed settled charges 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 of securities to US investors, without complying with registration laws designed to ensure that investors have sufficient, accurate information to make informed decisions before they invest.”

Abra began 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, nearly $500 million, of which came from US investors.

The SEC Investigation

The SEC alleges that Abra marketed the product as a way for investors to earn interest “auto-magically” and used investors' assets to generate income and fund interest payments. The complaint states that Abra Earn was offered and sold as a security without qualifying for an SEC registration exemption.

Moreover, the SEC claims Abra operated as an unregistered investment company for at least two years, holding over 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 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 cease and desist order against Abra. The regulator accused the crypto firm of committing fraud by suggesting it was a “crypto bank” without having a Texas bank charter and without providing Federal Deposit Insurance Corporation deposit insurance.

Furthermore, the Texas regulator claimed to have found that Abra and its CEO, William “Bill” Barhydt “were collectively insolvent or nearly insolvent” during its investigation on March 31, 2023.

Later in the same month, Abra settled with 25 US states to repay $82 million to its customers whose withdrawals were frozen. In exchange, the crypto firm avoided monetary penalties of $250,000 per jurisdiction.

Additionally, Abra agreed to stop accepting crypto allocations from US customers as of June 15, 2023, and refund US customer balances.