The Abra crypto platform has agreed to settle with the Securities and Exchange Commission (SEC) over charges involving the offering of unregistered securities on the platform and operating as an unregistered investment company. Abra has agreed to pay civil penalties, an amount to be determined by a court.
Notably, the SEC’s regulatory attack on the Abra platform comes following a potential lawsuit ending with Ripple after a federal Judge fined the blockchain giant $125 million for offering XRP to institutional investors. The regulatory watchdog has maintained its grip on crypto firms, ensuring that they meet and keep applicable laws.
How it Started
The SEC charged the California-based crypto platform on August 26 for violating securities laws. According to a press release issued by the commission, Abra was charged for failing to register the offer of its retail crypto lending assets. Additionally, Abra was accused of operating without the necessary registrations as an investment company.
The company which was founded in 2014, started offering its product “Abra Earn” to investors in the United States around July 2020. For context, Abra Earn is a product that allows investors in the U.S. to earn interest on their crypto assets by lending them to Abra exchange.
The SEC pointed out that the Abra Earn program racked up approximately $600 million in assets with almost $500 million coming from U.S. investors. In its charges, the SEC alleged that Abra marketed the program to investors as a means to earn interest on their crypto assets “auto-magically” while utilizing any means at its discretion to use the asset to generate income for the company and also pay accumulated investors’ interest.
Furthermore, the SEC accused the company of operating as an unregistered investment company for at least two years. During this time, the company offered securities and held over 40% of its total assets including its crypto loans to institutional borrowers. Speaking on the matter, Stacy Bogert, the Associate Director of the SEC’s Division of Enforcement emphasized how the company had sold almost half a billion dollars of securities to investors in the United States while failing to comply with registration laws.
“To compound the potential harm to investors, Abra allegedly sold its own securities while skirting applicable Investment Company Act provisions that provide a number of important protections to investors, including minimizing conflicts of interest,” she said.
Abra Agrees to Settle Charges
Meanwhile, the company has agreed to a settlement with the regulatory watchdog, prompting them to pay civil penalties which will be determined by the U.S. District Court for the District of Columbia. A statement by a spokesperson for Abra verified that the company had stopped the Abra Earn program in 2022 and already returned U.S. investors’ assets to their Abra Trade accounts in 2023.
The SEC also noted that the company did not deny or admit the allegations, but has agreed to a court injunction to prevent it from future violations of the registration provisions of the Securities Act and the Investment Company Act. The company’s spokesperson ultimately stressed that Abra “agrees to continue to comply with securities laws.”
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