Abra settles with the SEC and agrees to civil penalties and operational injunctions.
SEC emphasizes traditional securities laws also apply to new crypto asset markets.
Abra Earn program, which manages $600 million, lacked the necessary SEC registrations.
The Securities and Exchange Commission (SEC) has recently concluded a settlement with Plutus Lending LLC, known commercially as Abra. The company faced allegations of failing to register its crypto asset lending product, Abra Earn, and operating without an investment company registration.
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
Details of the Abra Earn Program
Abra, which launched its Abra Earn program in July 2020, promised U.S. investors an opportunity to earn variable interest rates by depositing their crypto assets. At its most active, the program managed assets close to $600 million, with U.S. investments making up nearly $500 million. The SEC’s findings suggest that Abra marketed this program as a straightforward way to generate interest in crypto holdings. However, the platform allegedly used these assets to generate its own income and pay participants interest.
According to the SEC, Abra and its offerings effectively constituted securities, which legally required registration under SEC guidelines. The lack of such registration and Abra Earn’s operational mode led to the SEC’s charges.
On August 26, Abra agreed to a settlement without admitting or denying the accusations. The agreement includes a court-determined civil penalty and an injunction that prevents future securities law violations by the firm. SEC Enforcement Associate Director Stacy Bogert emphasized the importance of these regulations, stating they aim to minimize conflicts of interest and protect investors.
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Following the settlement, a spokesperson from Abra indicated that the company had ceased the Abra Earn program in 2022. They reassured that assets from U.S. participants had been transferred to Abra Trade accounts by 2023. Moving forward, Plutus Lending has committed to adhering strictly to securities laws.
Legal Implications and SEC’s Stance
This is not the first time Abra has faced regulatory challenges. In June, the company settled with 25 U.S. state regulators over accusations of operating without appropriate licenses. Previously, in 2020, the SEC and the Commodity Futures Trading Commission imposed a $300,000 fine on Abra. The fines addressed issues related to offering security-based swaps to retail customers without necessary registrations.
The SEC’s ongoing regulatory oversight underscores the agency’s commitment to applying traditional securities laws in the evolving crypto market landscape, ensuring investor protections are upheld despite new technological developments
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