The United States Securities and Exchange Commission (SEC) disclosed that Cryptocurrency platform Abra has settled claims that the firm had not registered the offers and sales of its lending product Abra Earn. In an August 26, 2020, notice, the SEC announced that for violating securities laws, Plutus Lending, doing business as Abra, will cease any further violations of securities laws and will pay civil penalties to be decided by a court. For his part, Abra settled the case without admitting or denying the SEC’s allegations.
The SEC accused Abra of not registering the offers and sales of Abra Earn and of operating as an unregistered investment company. Stacy Bogert, the SEC Enforcement Associate Director, accosted Abra for selling its securities and circumventing the protections contained under the Investment Company Act. Bogert stated that the non-specialist enforcement actions of the SEC are based on the economic substance rather than on the formal classification of products.
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Abra’s Regulation Compliance Background
The SEC alleged that Abra marketed its Earn service as a way for investors to earn interest “auto-magically” while instead generating income for the platform itself. Abra launched the Earn service for U.S. investors in July 2020, and at its peak, the service managed approximately $600 million in assets globally. Nonetheless, Abra shut down the Earn service in 2022, and the available assets for users based in the United States moved to the Abra Trade account in 2023. When asked to confirm this information, a representative from Abra affirmed that Plutus Lending will adhere to securities laws in the future.
Recently, there was a notice on the SEC grounds and an earlier June settlement between Abra, its head William Barhydt, and 25 U.S. state regulators about the violation of the law and the absence of a license to operate. The SEC and the Commodity Futures Trading Commission also penalized Abra $300,000 in 2020 for selling “security-based swaps” directly to regular users without approval.
Conclusion
Abra’s recent settlement with the SEC highlights ongoing regulatory challenges in the cryptocurrency sector. As the platform navigates these challenges, regulators and the crypto community will closely watch its commitment to compliance.
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