SEC Cracks Down on Abra’s Unregistered Crypto Offerings

In response to claims about unregistered investment solicitations, cryptocurrency exchange Abra and the U.S. Securities and Exchange Commission (SEC) have struck a settlement. Plutus Lending LLC, the parent firm of Abra, was charged by the SEC with neglecting to properly register its retail crypto asset lending product, Abra Earn.

When Abra Earn was introduced in 2020, users could deposit bitcoin and receive interest in return. The product managed assets worth about $600 million at its height. The enforcement action, however, was prompted by the SEC’s allegation that Abra Earn was an unregistered security.

Unregistered Investment Company Allegations

Apart from the unregistered security allegation, Abra was also charged by the SEC with functioning as an unregistered investment business. The legal problems were made worse by the regulator’s claim that the corporation owned investment securities for more than 40% of its non-cash assets.

Abra has consented to resolve the charges without acknowledging or refuting the accusations. As part of this agreement, the corporation will pay a civil penalty as decided by the court.

Abra’s legal issues extended beyond the SEC. State regulators from Arkansas, Connecticut, Georgia, Ohio, Oregon, Texas, Vermont, and Washington State were similarly satisfied with the exchange in June. After conducting a cooperative investigation, the regulators charged Abra with operating without the required permits.

As part of the state settlements, Abra agreed to pay $250,000 per jurisdiction and was ordered to reimburse customers up to $82.1 million in crypto assets. The Conference of State Bank Supervisors (CSBS) highlighted these penalties in a press release, underscoring the importance of compliance in the rapidly evolving crypto landscape.

Abra’s settlements with both federal and state regulators emphasize the growing scrutiny on the crypto industry. These actions serve as a reminder for companies to ensure their products and services align with existing regulations to avoid similar enforcement measures.