Abra Reaches Settlement with SEC Over Unregistered Crypto Lending Service
Cryptocurrency platform Abra has agreed to settle charges brought by the U.S. Securities and Exchange Commission (SEC) regarding its unregistered crypto lending product, Abra Earn. The settlement, announced on August 26, 2024, marks another significant regulatory action in the ongoing scrutiny of crypto lending services.
The SEC alleged that Abra, operating as Plutus Lending LLC, violated federal securities laws by offering and selling Abra Earn without proper registration. Launched in July 2020, the service allowed U.S. investors to deposit crypto assets in exchange for promised variable interest rates. At its peak, Abra Earn held approximately $600 million in assets, with nearly $500 million coming from U.S. investors.
According to the SEC’s complaint, Abra marketed the product as a way for investors to earn interest “auto-magically” on their crypto assets. The regulator contends that Abra used investors’ assets at its discretion to generate income for itself and fund interest payments, without providing sufficient information to investors as required by securities laws.
In addition to the unregistered securities charges, the SEC accused Abra of operating as an unregistered investment company for at least two years. This allegation stems from Abra holding over 40% of its total assets, excluding cash, in investment securities, including loans of crypto assets to institutional borrowers.
Stacy Bogert, Associate Director of the SEC’s Division of Enforcement, stated, “This matter reflects yet again that in conducting enforcement investigations, we are governed by economic realities, not cosmetic labels.”
To settle the charges, Abra has consented to an injunction prohibiting it from violating securities registration provisions. The company will also pay civil penalties, the amounts of which are to be determined by the court. Notably, Abra neither admitted nor denied the SEC’s allegations as part of the settlement.
An Abra spokesperson confirmed that the Abra Earn service was discontinued in 2022, and all assets for U.S. customers, including accrued interest, were transferred to their Abra Trade accounts in 2023. The company maintains that no consumers were harmed by the settlement or wind-down of Abra Earn.
This settlement follows a broader pattern of regulatory actions against crypto lending platforms. In recent years, the SEC has targeted several major players in the industry, including BlockFi, Celsius, and Gemini, over similar allegations of offering unregistered securities.
As the cryptocurrency industry continues to evolve, this case underscores the ongoing challenges firms face in navigating complex regulatory requirements. It also highlights the SEC’s commitment to enforcing securities laws in the rapidly changing digital asset landscape.
