- The SEC has settled with Abra for failing to register its Abra Earn lending product.
- The company was accused of not registering its product and operating as an unregistered investment company.
- Abra Earn, launched in July 2020, managed up to $600 million, with nearly $500 million from U.S. investors.
The U.S. Securities and Exchange Commission (SEC) has reached a settlement with cryptocurrency platform Abra following allegations that the firm failed to register its lending product, Abra Earn, as required.
The SEC’s press release reveals that Plutus Lending LLC, which operates under the name Abra, has been charged with not registering the offers and sales of its retail crypto asset lending product and with functioning as an unregistered investment company.
The SEC’s complaint outlines that the company began promoting Abra Earn around July 2020, allowing U.S. investors to deposit their crypto assets with the platform in exchange for a variable interest rate. At its peak, the program managed roughly $600 million in assets, with nearly $500 million coming from U.S. investors.
The company marketed the product as a way for users to earn interest on their crypto assets effortlessly, while the firm reportedly used the assets in various ways to generate income for itself and fund interest payments.
Details of Abra Earn and its Market Impact
According to the SEC, Abra Earn was offered and sold as a security, yet these transactions did not qualify for an exemption from registration. The complaint further alleges that the company operated as an unregistered investment company for at least two years, holding over 40% of its total assets in investment securities, including crypto assets loans to institutional borrowers.
In June 2023, the company began to wind down the Abra Earn program and instructed U.S. customers to withdraw their crypto assets. Stacy Bogert, Associate Director of the SEC’s Division of Enforcement, commented:
As alleged, the company sold nearly half a billion dollars of securities to U.S. investors without complying with registration laws designed to ensure that investors have sufficient, accurate information to make informed decisions before they invest.
Bogert emphasized that the company’s actions potentially harmed investors by bypassing regulations meant to protect them and reduce conflicts of interest. However, to settle the charges, the company has agreed to an injunction that prevents it from violating these registration requirements. The firm will be required to pay civil penalties determined by the court, although it does not admit or deny the SEC’s allegations.
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