The U.S. Securities and Exchange Commission (SEC) has reached an agreement with crypto lending platform Abra after the startup was accused of selling unregistered securities to consumers and acting as an unregistered investment company.
Plutus Lending, the company behind Abra, has agreed to the settlement terms without admitting or denying the SEC’s claims. The details of the Civil penalties to be determined by the court.
Abra Earn program under criticism
After According to Bloomberg, Abra’s platform, Abra Earn, allowed retail investors to invest their crypto assets for interest and promoted itself as a means for individuals to earn returns seemingly effortlessly.
At its peak, the company’s Earn program is said to have amassed assets worth about $600 million, a significant portion of which – nearly $500 million – came from U.S. investors, according to the SEC’s statement released Monday.
The SEC complaint alleges that the lending platform used “discretionary investment practices” to generate high returns with Consumer FundThe complaint highlights that over a two-year period, Abra operated as an “unregistered investment company” by issuing purported “securities” and holding 40% of its total assets in investment securities, including loans in the form of crypto assets to institutional borrowers.
In response, Abra began winding down the Earn program in June 2023 and instructed U.S.-based customers to withdraw their assets.
SEC allegations of “unregistered sales”
Stacy Bogert, deputy director of the SEC’s Division of Enforcement, emphasized the importance of registration laws in “protecting the interests of investors,” stating:
As alleged, Abra sold securities worth nearly half a billion dollars to US investors without Reporting laws is intended to ensure that investors have sufficient and accurate information to make informed decisions before investing.
The company’s notable investors included Amex Ventures, Blockchain Capital and the Stellar Development Foundation, which at one point gave the startup a valuation of $500 million.
The unfolding events in crypto Rent a room have seen other platforms such as BlockFi, Celsius and Voyager, which offer similar programs to Abra Earn, file for bankruptcy in 2022.
In response to these developments, an Abra spokesperson assured that consumers had not suffered any harm as a result of the settlement or the subsequent closure of the Earn program.
All assets, including accrued interest, of Earn clients based in the United States were transferred to their Abra Trade accounts in 2023. The company continues to operate in the United States through Abra Capital Management, an SEC-registered investment advisor, ensuring continued Compliance with legal regulations and investor protection.
At the time of writing, the total cryptocurrency market capitalization stands at $2.1 trillion, after briefly rising to the $2.23 trillion mark over the weekend. On the other hand, the largest cryptocurrency on the market, Bitcoin (BTC), is trading at $63,100, down almost 2% in the last 24 hours.
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