On Monday, the US Securities and Exchange Commission (SEC) filed charges against Plutus Lending LLC, the crypto investment firm commonly known as Abra.
According to the charges, the company conducted the unregistered offering and sales of crypto asset securities. It was also accused of operating as an unregistered investment firm.
The Settlement
The company has already reached an agreement with the SEC regarding its Abra Earn service. It has also agreed to pay a fine, although the amount was unspecified.
The settlement agreement was confirmed by a spokesperson for Abra, who also revealed that its Earn service had been shut down back in 2022.
The spokesperson said that PLL had not admitted to any wrongdoing. However, it had agreed to operate in compliance with the securities laws.
They added that the shuttering down of Abra Earn had not harmed any consumer. Last year, all US Earn customers had gotten back all their crypto assets, along with accrued interest, in their Abra Trade accounts.
They also disclosed that Abra had continued its operations in the United States through Abra Capital Management. This investment advisor is registered with the SEC.
This action of the SEC is in line with its pattern of aiming at major companies in the crypto industry.
The Complaint
The SEC’s complaint dictated that Abra had started offering its Abra Earn product to investors in the US in July 2020.
Customers had used the service to deposit their crypto assets on the platform in exchange for variable interest rates.
The value of crypto assets that had been held in Abra Earn at the time of its peak was close to $600 million. Almost $500 million of these assets belonged to US investors.
Stacy Bogert, the Associate Director of the Division of Enforcement of the SEC, talked about Abra’s issue.
She said that almost half a billion dollars in securities had been sold by Abra to US investors. It had done so without compliance with registration laws.
The laws in question are aimed at ensuring that investors have sufficient and accurate information for making informed investment decisions.
According to the securities regulator, Abra had advertised its product to investors as a means of earning interest on their crypto assets ‘auto-magically’.
Additional Details
The complaint also highlighted that the crypto assets of its investors had been used by Abra for generating income and funding interest payments.
The SEC further alleged that these offerings were actually securities and needed to comply with registration requirements.
In addition, it also asserted that Abra had been operating as an unregistered investment firm for about two years.
It had issued securities and held more than 40% of its assets in investment securities, excluding cash.
Bogert said that this matter indicates that economic realities are what is relevant in enforcement investigations, rather than cosmetic labels.
The SEC is not the only one to have taken regulatory action against Abra. Abra and its CEO had agreed with financial regulators of more than 25 states earlier this year.
These agreements were related to its unlicensed operations. Abra agreed to issue refunds to clients in these states valued at $82.1 million.