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 means for individuals to generate returns in a seemingly effortless manner.
At its peak, the firm’s Earn program reportedly amassed approximately $600 million in assets, with a substantial portion—nearly $500 million—coming from US investors, as per the SEC’s statement released on Monday.
The SEC’s complaint asserts that the lending platform engaged in “discretionary investment practices” to yield high returns with consumer funds. The complaint 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 significance 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 ensure that investors have sufficient, accurate information to make informed decisions before they invest.
Notable investors in the company 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 in 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 these developments, an Abra spokesperson attested that no harm befell consumers due to the settlement or the subsequent 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 within the United States through Abra Capital Management, an SEC-registered investment adviser, ensuring ongoing regulatory compliance and investor protection.
At the time of writing, the total crypto market capitalization stands at $2.1 trillion, after a brief spike toward the $2.23 trillion mark over the weekend. On the other hand, the largest cryptocurrency on the market, Bitcoin (BTC), is trading at $63,100, down nearly 2% in the last 24 hours.
Featured image from DALL-E, chart from TradingView.com
