The United States Securities and Exchange Commission settled its charges from July 2020 against Plutus Lending LLC, operating as Abra, for offering and selling unregistered crypto asset securities in its crypto lending product.

The agency also alleged that the financial services and tech firm operated as an unregistered investment company, according to an official release by the regulator. 

The SEC complaint centered around the firm's yield-earning service, Abra Earn, which permitted U.S. users to earn interest on their crypto. Abra purportedly used customer digital assets "to generate income for itself and to fund interest payments" as well as offer and sell securities that "did not qualify for an exemption from SEC registration."

To settle with the SEC, "Abra, without admitting or denying the SEC’s allegations, has consented to an injunction prohibiting it from violating the registration provisions of the Securities Act and the Investment Company Act and requiring it to pay civil penalties in amounts to be determined by the court," the agency said.

Abra Earn brought in nearly $600 million in crypto assets, $500 million of which came from U.S. customers, the SEC adds. 

"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 before they invest," said Associate Director of the SEC’s Division of Enforcement Stacy Bogert in a statement. "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."

In a statement to The Block, an Abra spokesperson said:

“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.”

In June 2023, the Texas State Securities Board also filed an enforcement action against Abra and its CEO regarding Abra Earn for alleged securities fraud, The Block previously reported. 

Source : The Block - Aug 27, 2024