The SEC recently filed settled charges against Abra for failing to register its crypto asset lending product, Abra Earn. The allegations include selling nearly half a billion dollars of securities to US investors without complying with registration laws, thereby depriving investors of essential information needed to make informed decisions.
Furthermore, the SEC also charged Plutus Lending LLC, Abra’s owner, for operating as an unregistered investment company. Abra Earn, which allowed investors to lend crypto assets for variable interest rates, reached approximately $600 million in assets, with a significant portion coming from US investors. The SEC claims that Abra marketed the product as a way to earn interest ‘auto-magically,’ using investors’ assets to generate income and fund interest payments, all without proper registration.
In addition to the SEC charges, the Texas State Securities Board issued an emergency cease and desist order against Abra for fraudulently portraying itself as a “crypto bank” without the necessary licenses and insurance. The regulator also found Abra and its CEO to be insolvent or nearly insolvent, casting doubt on their financial stability.
Abra later settled with 25 US states to repay $82 million to customers whose withdrawals were frozen, thereby avoiding substantial monetary penalties. The agreement also required Abra to cease accepting crypto allocations from US customers and refund any remaining balances, signaling a significant financial setback for the company.
The charges and regulatory actions against Abra highlight the importance of compliance with registration laws and transparency in the cryptocurrency industry. Investors must be cautious when engaging with crypto lending platforms to avoid potential risks and regulatory scrutiny. Abra’s case serves as a cautionary tale for companies operating in the crypto space, emphasizing the consequences of non-compliance and fraudulent practices.
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