The U.S. Securities and Exchange Commission (SEC) announced on August 26 that it had filed settled charges against Plutus Lending LLC, doing business as Abra, for allegedly failing to register the offers and sales of its retail crypto asset lending product, Abra Earn. The SEC also alleges that Abra operated as an unregistered investment company.
According to the SEC’s complaint, Abra began offering and selling Abra Earn in July 2020, allegedly allowing U.S. investors to earn a variable interest rate in exchange for their crypto assets. The SEC alleges that Abra marketed Abra Earn as a way to “auto-magically” earn interest, using the crypto assets in various undisclosed ways to generate income and fund interest payments. The SEC claims that these activities made Abra Earn a security under U.S. law and that the offers and sales did not qualify for any exemption from SEC registration requirements.
The SEC also alleges that Abra operated as an unregistered investment company for at least two years, violating the Investment Company Act by holding more than 40 percent of its total assets, excluding cash, in investment securities, including loans of crypto assets to institutional borrowers. In June 2023, the SEC noted that Abra began winding down the Abra Earn program and directed U.S. customers to withdraw their crypto assets.
Stacy Bogert, Associate Director of the SEC’s Division of Enforcement, stated that Abra sold nearly half a billion dollars in securities to U.S. investors without complying with registration laws intended to protect investors. Bogert also emphasized that Abra circumvented important protections under the Investment Company Act, which are designed to minimize conflicts of interest and safeguard 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 global platform for digital asset prime services and wealth management, primarily catering to institutional clients and high-net-worth individuals. Originally known for its retail crypto trading services, Abra has since shifted focus and now operates more as a wealth management platform for private clients, family offices, and institutional investors. The company offers various services, including asset management, lending, staking, and treasury management through its platforms Abra Prime and Abra Private.
Abra’s services are tailored for clients looking to gain exposure to digital assets, including Bitcoin, Ethereum, and Solana, among others. These services are particularly geared towards managing large portfolios, providing customized investment strategies, and offering over-the-counter (OTC) trading solutions.
In recent years, Abra has faced significant regulatory scrutiny. For example, the Texas State Securities Board and other state regulators have accused the company of various violations, including operating without the necessary licenses and insolvency issues. Despite these challenges, Abra continues to operate and has recently settled multiple legal disputes.
This was Abra CEO’s reaction to the SEC’s announcement:
Featured Image via Pixabay
