SEC Targets Abra for Unregistered Crypto Asset Sales

The U.S. Securities and Exchange Commission (SEC) has taken action against Plutus Lending LLC, operating as Abra, for failing to register its crypto asset lending product, Abra Earn. This move further complicates Abra's regulatory standing as the SEC alleges that the company operated as an unregistered investment company.

Abra's Controversial Offerings

According to the SEC’s complaint, Abra started offering the Abra Earn product in the United States in July 2020, allowing U.S. investors to lend their crypto assets to the company in exchange for variable interest payments. At its peak, this program managed approximately $600 million in assets, with nearly $500 million sourced from U.S. investors.

The SEC claims that Abra Earn was marketed in a misleading manner, constituting an unregistered security and violating federal securities laws. Stacy Bogert, the associate director of the SEC’s Division of Enforcement, stated, “As alleged, Abra sold nearly half a billion dollars of securities to U.S. investors, without complying with registration laws designed to ensure that investors have sufficient, accurate information to make informed decisions.”

Regulatory Implications

In addition to the securities violations, the SEC alleges that Abra operated as an unregistered investment company for at least two years, holding more than 40% of its total assets in investment securities, including loans of crypto assets to institutional borrowers.

Abra has started winding down the Abra Earn program as of June 2023, instructing U.S. customers to withdraw their assets. The company has agreed to an injunction against future violations and is awaiting the court's decision on civil penalties.

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