Crypto Lending Platform Abra Settles SEC Charges Over ‘Unregistered Securities Sale’

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As a seasoned researcher and investor with over two decades of experience under my belt, I have seen the evolution of financial markets and the rise of digital assets. The recent settlement between the SEC and Abra serves as a stark reminder of the regulatory challenges that the crypto industry continues to face.

The U.S. Securities and Exchange Commission (SEC) has agreed to a settlement with the cryptocurrency lending service, Abra, due to claims that they offered unregistered securities to customers and functioned as an unlicensed investment firm.

In a mutual agreement, Plutus Lending – the company responsible for Abra – has consented to the terms set forth by the Securities and Exchange Commission (SEC), neither admitting nor denying their allegations. The exact amount of fines will be decided by the court.

Abra Earn Program Under Fire

As a researcher, I’ve come across Abra’s platform, Abra Earn, which allows retail investors like myself to deposit our cryptocurrencies, earning interest on them. Abra Earn markets itself as an easy way for individuals to yield returns in the complex world of crypto investments.

Reaching its zenith, it’s been reported that the firm’s Earn program accumulated around $600 million in total assets. Interestingly, almost half of this sum, approximately $500 million, was contributed by investors residing in the United States, as stated in a report released on Monday by the Securities and Exchange Commission.

According to the SEC’s lawsuit, Abra is accused of using discretionary investment strategies to generate high returns from consumer funds. The lawsuit suggests that for a two-year span, Abra functioned as an unregistered investment company by offering and managing what they claim are securities, while keeping 40% of its total assets invested in various securities such as loans of cryptocurrencies to institutional lenders.

In response, Abra started phasing out the Earn program in June 2023, asking its U.S. clients to remove their funds.

SEC Allegations Of ‘Unregistered Sales’

Stacy Bogert, an associate director at the Securities and Exchange Commission’s (SEC) Division of Enforcement, highlighted the importance of registration rules to “protect investor rights,” as she put it.

It is claimed that Abra failed to adhere to registration regulations when selling approximately half a billion dollars worth of securities to American investors, which means they didn’t provide the necessary detailed and truthful information that investors need to make well-informed decisions prior to investing.

Distinguished financial backers for the company were Amex Ventures, Blockchain Capital, and the Stellar Development Foundation. At one time, these investments catapulted the young business to an appraised value of $500 million.

2022 saw various crypto lending platforms, including BlockFi, Celsius, and Voyager, which have similar offerings as Abra Earn, filing for bankruptcy due to the evolving circumstances in the crypto lending sector.

Regarding these recent changes, a representative from Abra clarified that neither the settlement nor the shutdown of the Earn program caused any harm to consumers.

2023 saw all assets, including accumulated interest, of Earn’s U.S.-based customers being moved to their respective Abra Trade accounts. The company still conducts its operations within the U.S., functioning under Abra Capital Management – a registered investment adviser with the Securities and Exchange Commission (SEC). This ongoing association ensures continued adherence to regulatory standards and investor safety.

Crypto Lending Platform Abra Settles SEC Charges Over ‘Unregistered Securities Sale’

Currently, the overall crypto market value amounts to approximately $2.1 trillion, having briefly surged past $2.23 trillion during the weekend. Conversely, Bitcoin (BTC) is currently being traded at around $63,100, marking a nearly 2% decrease in its value over the past day.

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2024-08-27 12:12