Abra charged by SEC for unregistered crypto offers and sales

The U.S. Securities and Exchange Commission announced on Aug. 26 that it has settled charges against Plutus Lending LLC, known as Abra.

This article has been updated to include a statement from Abra.

The charges relate to Abra’s failure to register its retail crypto lending product, Abra Earn, and for operating as an unregistered investment company. According to the SEC’s complaint, Abra began offering Abra Earn in July 2020, allowing U.S. investors to lend their crypto assets in exchange for interest payments.

At its peak, Abra Earn managed approximately $600 million in assets, with nearly $500 million coming from U.S. investors, according to the SEC’s release.

On August 12, the New Jersey Attorney General advised state investors to withdraw funds from Abra as it wound down U.S. operations following a multistate investigation into the sale of unregistered securities. Under a settlement with New Jersey regulators, Abra was required to return all remaining crypto assets to investors, convert them to U.S. dollars, and issue refund checks for amounts over $10.

This settlement follows similar actions in Texas, where Abra was accused of hiding critical financial information. 

Details of Abra’s charges

The SEC alleges that Abra Earn was marketed as a secure investment without meeting the necessary registration requirements. Additionally, Abra held more than 40% of its assets in investment securities, violating the Investment Company Act.

Although Abra began winding down the program in June 2023, the SEC’s charges emphasize the company’s failure to comply with regulations designed to protect investors.

Abra has agreed to settle the charges by consenting to an injunction and potential civil penalties, the amounts of which will be determined by the court.

This news echoes the SEC’s recent legal battles with Gemini Earn. In February, Genesis Global Capital, LLC agreed to pay a $21 million penalty to settle SEC charges for the unregistered offer and sale of securities through its crypto lending program, Gemini Earn. 

Following Genesis’s bankruptcy filing in January 2023, investors were unable to withdraw their assets, and the SEC’s enforcement emphasizes the risks of non-compliance with federal securities laws in the volatile crypto market.

An Abra spokeperson sent the following statement to crypto.news:

“Plutus Lending LLC (“PLL”), a subsidiary of Abra, has agreed to settle an action brought by the SEC regarding Abra Earn, a service that was discontinued in 2022. Without admission of wrongdoing, PLL agrees to continue to comply with securities laws. No consumers were harmed at all by the settlement or wind down of Abra Earn.  All assets for US Earn customers including accrued interest were transferred to their Abra Trade accounts in 2023. Abra continues to operate in the USA via Abra Capital Management, an SEC-registered investment advisor.”