Bitrabo Editorial
The US Securities and Exchange Commission (SEC) has agreed to a settlement with crypto lending platform Abra over accusations of selling unregistered securities to the public and operating as an unregistered investment company.
Plutus Lending, the company behind Abra, has accepted the settlement conditions without admitting or denying the SEC’s allegations, and the court will determine the specific civil penalties.
Abra’s Abra Earn Program Comes Under Scrutiny
Bloomberg reported that Abra’s platform, Abra Earn, allowed retail investors to deposit their cryptocurrencies in exchange for interest, promoting itself as an easy way for individuals to earn returns effortlessly.
At its peak, the Abra Earn program accrued around $600 million in assets, with a significant portion, close to $500 million, coming from US investors as mentioned in the SEC’s statement on Monday.
The SEC’s complaint accuses the lending platform of using discretionary investment strategies to generate high returns with consumer funds. It also noted that Abra operated as an unregistered investment company by issuing securities and holding 40% of its assets in investment securities for two years, including cryptocurrency loans to institutional borrowers.
In response, Abra began winding down the Earn program in June 2023 and advised US customers to withdraw their assets.
SEC Allegations Regarding Unregistered Sales
Stacy Bogert, associate director of the SEC’s Division of Enforcement, highlighted the importance of registration laws in protecting investors’ interests, mentioning that Abra sold almost half a billion dollars of securities to US investors without complying with registration laws designed to provide investors with accurate information for informed investment decisions.
Noteworthy investors in Abra included Amex Ventures, Blockchain Capital, and the Stellar Development Foundation, driving the company’s valuation to $500 million at one point.
In the crypto lending industry, other platforms like BlockFi, Celsius, and Voyager, offering similar programs to Abra Earn, declared bankruptcy in 2022.
An Abra representative assured that customers were not harmed by the settlement or the closure of the Earn program. All assets, including interest, belonging to US-based Earn clients were transferred to their Abra Trade accounts in 2023. Abra continues to operate within the US through Abra Capital Management, an SEC-registered investment adviser, ensuring regulatory compliance and investor protection.
Currently, the total crypto market capitalization is at $2.1 trillion, with Bitcoin (BTC), the largest cryptocurrency, trading at $63,100, a decrease of nearly 2% in the last 24 hours.
Featured image from DALL-E, chart from TradingView.com