The US Securities and Exchange Commission (SEC) has reached a settlement with crypto lending platform Abra following allegations that the startup sold unregistered securities to consumers and operated as an unregistered investment company.
Plutus Lending, the entity behind Abra, has agreed to the settlement terms without admitting or denying the SEC’s claims, with the specifics of the civil penalties to be determined by the court.
Abra Earn Program Under Fire
According to Bloomberg, Abra’s platform, Abra Earn, enabled retail investors to deposit their crypto assets in exchange for interest, promoting itself as a method for people to generate returns in a seemingly effortless manner.
At its peak, the firm’s Earn program reportedly amassed roughly $600 million in assets, with a considerable portion—nearly $500 million—coming from US investors, as per the SEC’s statement released on Monday.
The SEC’s grievance asserts that the lending platform engaged in “discretionary investment practices” to yield high returns with consumer funds. The grievance highlights that for a period of two years, Abra operated as an “unregistered investment company” by issuing alleged “securities” and maintaining 40% of its total assets in investment securities, including loans of crypto assets to institutional borrowers.
In response, Abra commenced winding down the Earn program in June 2023, instructing US-based customers to withdraw their assets.
SEC Allegations Of ‘Unregistered Sales’
Stacy Bogert, associate director of the SEC’s Division of Enforcement, emphasized the importance of registration laws in “safeguarding investors’ interests,” stating:
As alleged, Abra sold nearly half a billion dollars of securities to US investors, without complying with registration laws designed to be sure that investors have sufficient, accurate information to make informed decisions before they invest.
Notable investors in the corporate included Amex Ventures, Blockchain Capital, and the Stellar Development Foundation, propelling the startup to a valuation of $500 million at one point.
The unfolding events within the crypto lending space have seen other platforms like BlockFi, Celsius, and Voyager, offering akin programs to Abra Earn, file for bankruptcy in 2022.
In response to those developments, an Abra spokesperson attested that no harm befell consumers attributable to the settlement or the following closure of the Earn program.
All assets, including accrued interest, belonging to US-based Earn customers were transferred to their Abra Trade accounts in 2023. The firm continues to operate inside the US through Abra Capital Management, an SEC-registered investment adviser, ensuring ongoing regulatory compliance and investor protection.
On the time of writing, the whole crypto market capitalization stands at $2.1 trillion, after a transient spike toward the $2.23 trillion mark over the weekend. Alternatively, the biggest cryptocurrency in the marketplace, Bitcoin (BTC), is trading at $63,100, down nearly 2% within the last 24 hours.
Featured image from DALL-E, chart from TradingView.com