SEC Forces Abra to Pay Civil Penalties for Unregistered Crypto Securities
The U.S. Securities and Exchange Commission (SEC) announced that Abra, also known as Plutus Lending, has agreed to pay civil penalties as part of a settlement related to the unregistered offers and sales of its lending product, Abra Earn.
Abra settled the charges without admitting or denying the allegations, with the exact amount to be determined by the court. The SEC highlighted that Abra would face an injunction to prevent future violations of securities laws.
Complex Issues With Abra’s Cryptocurrency Services
Founded in 2014, Abra provides a range of cryptocurrency services for individual and institutional investors, including borrowing, lending, staking, and yield opportunities.
- Abra launched Abra Earn in 2020, allowing investors to earn interest on their crypto assets. At its peak, the program held $600 million in assets, with a majority coming from U.S. investors.
- The SEC alleged that Abra failed to register the offers and sales of Abra Earn for over two years. More than 40% of Abra’s total assets were in investment securities, including loans of crypto assets to institutional borrowers.
- Abra marketed Abra Earn as a way for investors to earn interest on their crypto holdings and used investors’ assets to generate income for itself.
Cryptocurrency Lending Issues and Regulatory Actions
The SEC has been actively pursuing regulatory actions against cryptocurrency lending platforms, including major players like Coinbase and Gemini.
- In 2023, the SEC charged Gemini Trust Company and Genesis Global Capital, LLC for the unregistered offer and sale of securities through the Gemini Earn crypto lending program.
- Gemini Earn, which allowed customers to loan their crypto assets in exchange for interest payments, was considered an unregistered securities offering. Genesis agreed to pay a $21 million penalty to settle SEC charges.
- Coinbase received a Wells Notice from the SEC regarding its planned Coinbase Lend program. Despite arguing that it was transparent with the SEC, Coinbase decided to abandon the program after the SEC indicated enforcement action.
Hot Take: Stay Informed About Regulatory Compliance in the Crypto Space
It is crucial to stay informed about regulatory compliance in the cryptocurrency space to avoid legal troubles and financial penalties from regulatory bodies like the SEC.
By ensuring transparency and adherence to securities laws, cryptocurrency service providers can build trust with investors and operate within the boundaries of the law.
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