Crypto Company Abra Charged by SEC Because 40% of Assets Are Securities

Key Points:

• The SEC charged crypto company Abra, operated by Plutus Lending LLC, for offering unregistered securities through its lending product.
• Abra agreed to settle the charges without admitting or denying wrongdoing and faces potential civil penalties.

The U.S. Securities and Exchange Commission (SEC) has taken enforcement action against Abra, a crypto lending platform operated by Plutus Lending LLC, for allegedly failing to register its retail crypto asset lending product, Abra Earn.

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SEC Charges Crypto Company Abra for Offering Unregistered Lending Product

The SEC said crypto company Abra sold unregistered securities, in the form of a contract for differences, to consumers and functioned as an unregistered investment company under federal securities laws.

Abra Earn, which was launched in July 2020, allowed retail investors to deposit their cryptocurrency and earn interest. The service was strongly styled as an opportunity for consumers to auto-magically earn returns. At its peak, Abra Earn managed roughly $600 million in assets, with nearly $500 million coming from U.S. investors. The SEC is alleging that Abra’s asset+discretionary-interest-reward is, in effect, a security and thus should have been registered.

The agency also said Abra had more than 40% of its assets in investment securities, including loans to institutional borrowers. That threshold subjected the asset to the obligation to register under the Investment Company Act of 1940, a requirement the firm failed to heed, according to the agency.

SEC Intensifies Crackdown on Crypto NDS Industry with Abra Case

Crypto company Abra agreed to the settlement with the SEC without admitting or denying the allegations, as well as possible civil penalties as may be determined by the court; in exchange, the settlement abides by an injunction against future violations.

The move of the SEC against Abra reflects its relentless push against the crypto industry. These are part of the wider effort that includes, among others, the lawsuit filed against the biggest names in crypto exchanges: Binance, Kraken, and Coinbase.