SEC Reaches Settlement with Abra Over Unregistered Crypto Securities Offering

The US Securities and Exchange Commission announced Monday that crypto lender Abra has settled with the agency. The settlement addresses charges that Abra improperly marketed Abra Earn to customers as a product that should have been registered as a security.

According to the SEC, starting in 2020, Abra aggressively promoted Abra Earn, promising high returns for using customers’ assets. At its height, Abra Earn managed around $600m in assets, with nearly $500m from US investors.

The complaint also mentions that in June 2023, Abra began phasing out the Abra Earn program, advising its US customers to withdraw their crypto assets from the platform.

We filed settled charges against Plutus Lending LLC, which does business as Abra, for failing to register the offers & sales of its retail crypto asset lending product, Abra Earn. The SEC also charged Abra w/ operating as an unregistered investment co. https://t.co/wbrpYFQyrZ pic.twitter.com/zG4Argki2H

— U.S. Securities and Exchange Commission (@SECGov) August 26, 2024

SEC Targets Abra for Alleged Unregistered Sales and Misleading Promises

The SEC’s complaint further accuses Abra of promoting Abra Earn by claiming it allowed investors to easily earn interest on their crypto assets. Allegedly, Abra used its discretion to deploy these assets in various ways to generate income for itself and finance interest payments.

Further, the complaint asserts that Abra Earn was marketed and sold as a security. However, it did not meet the criteria for exemption from SEC registration requirements.

The SEC also alleges that Abra operated as an unregistered investment company for at least two years. This was due to Abra allegedly issuing securities and having over 40% of its non-cash assets invested in securities. These investments included crypto asset loans to institutional borrowers.

“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,” said Stacy Bogert, Associate Director at the SEC’s Division of Enforcement.

Abra Agrees to $82M Payout to Settle Multi-State Licensing Dispute

Earlier this month, New Jersey regulators encouraged investors to remove any remaining crypto assets from their Abra accounts.

Previously, in June, 25 US states negotiated a settlement with Abra and its CEO due to their failure to secure required licenses.

Consequently, Abra committed to reimbursing customers in these states up to $82.1m. Notably, states such as Washington, Texas, Georgia, and Ohio chose to forgo financial penalties in favor of ensuring customer compensation.