The US Securities and Exchange Commission (SEC) recently announced that crypto lender Abra has settled with the agency after facing charges of improperly marketing Abra Earn as a security. According to the SEC, Abra aggressively promoted Abra Earn, promising high returns for using customers’ assets. The program managed around $600 million in assets, with nearly $500 million coming from US investors. In June 2023, Abra began phasing out the Abra Earn program, advising its US customers to withdraw their crypto assets from the platform.
The SEC’s complaint against Abra accuses the company of promoting Abra Earn by claiming it allowed investors to easily earn interest on their crypto assets. Allegedly, Abra used its discretion to deploy these assets in various ways to generate income for itself and finance interest payments. The complaint also alleges that Abra Earn was marketed and sold as a security, without meeting the criteria for exemption from SEC registration requirements. Additionally, Abra is accused of operating as an unregistered investment company for at least two years due to issuing securities and having a significant portion of its non-cash assets invested in securities.
Stacy Bogert, Associate Director at 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 before they invest.” In response to the charges, Abra has agreed to a settlement with the SEC.
Earlier this month, New Jersey regulators advised investors to remove any remaining crypto assets from their Abra accounts. In June, 25 US states negotiated a settlement with Abra and its CEO due to their failure to secure required licenses. As part of the settlement, Abra committed to reimbursing customers in these states up to $82.1 million. States like Washington, Texas, Georgia, and Ohio chose to forgo financial penalties in favor of ensuring customer compensation.
In conclusion, the settlement between Abra and the SEC highlights the importance of regulatory compliance in the cryptocurrency sector. Companies must ensure that their products and services meet legal requirements to avoid facing penalties and legal action. The case also emphasizes the significance of investor protection and the need for transparency in the industry. Moving forward, it will be essential for companies operating in the crypto space to prioritize compliance with regulations to maintain trust and credibility among investors and regulators.
