SEC files charges against Abra
27 August 2024 US
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The US Securities and Exchange Commission (SEC) has filed settled charges against Plutus Lending (which operates as Abra) for failure to register the offers and sales of its crypto asset lending product, Abra Earn. Abra has also been charged for operating as an unregistered investment company.
The SEC’s complaint alleges that Abra Earn was marketed to investors as a means to earn interest on crypto assets “auto-magically,” and that Abra exercised its discretion to use investors’ crypto assets in ways to generate income for itself. Abra Earn was further offered and sold as a security, which did not exempt the company from SEC registration.
The charges also state that Abra operated for over two years as an unregistered investment company as it held more than 40 per cent of its total assets, excluding cash, in investment securities.
Stacy Bogert, associate director of the SEC’s division of enforcement, states: “As alleged, Abra sold nearly half a billion dollars of securities to US investors, without complying with registration laws designed to ensure that investors have sufficient, accurate information to make informed decisions before they invest.
“To compound the potential harm to investors, Abra allegedly sold its own securities while skirting applicable Investment Company Act provisions that provide a number of important protections to investors, including minimizing conflicts of interest.”
The complaint charges Abra with violating Sections 5(a) and 5(c) of the Securities Act of 1933 and Section 7(b) of the Investment Company Act of 1940.
In response, Abra has consented to an injunction requiring it to pay civil penalties in amounts to be determined by the court.
A spokesperson for Abra comments: “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.”
The SEC’s complaint alleges that Abra Earn was marketed to investors as a means to earn interest on crypto assets “auto-magically,” and that Abra exercised its discretion to use investors’ crypto assets in ways to generate income for itself. Abra Earn was further offered and sold as a security, which did not exempt the company from SEC registration.
The charges also state that Abra operated for over two years as an unregistered investment company as it held more than 40 per cent of its total assets, excluding cash, in investment securities.
Stacy Bogert, associate director of the SEC’s division of enforcement, states: “As alleged, Abra sold nearly half a billion dollars of securities to US investors, without complying with registration laws designed to ensure that investors have sufficient, accurate information to make informed decisions before they invest.
“To compound the potential harm to investors, Abra allegedly sold its own securities while skirting applicable Investment Company Act provisions that provide a number of important protections to investors, including minimizing conflicts of interest.”
The complaint charges Abra with violating Sections 5(a) and 5(c) of the Securities Act of 1933 and Section 7(b) of the Investment Company Act of 1940.
In response, Abra has consented to an injunction requiring it to pay civil penalties in amounts to be determined by the court.
A spokesperson for Abra comments: “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.”
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