The U.S. Securities and Exchange Commission charged Plutus Lending LLC, operating as Abra, in July 2020 with offering and selling unregistered cryptocurrency asset securities in cryptocurrency lending products.
According to an official statement from the regulator, the agency alleged that the financial services and technology company was operating as an unregistered investment firm.
The SEC complaint focused on Abra Earn, the company’s yield-generating service that allowed U.S. users to earn interest on their cryptocurrencies. Abra allegedly used customer digital assets to “generate its own income and fund interest payments” and offered and sold securities that “did not qualify for an exemption from SEC registration.”
The agency said, “As part of the settlement with the SEC, Abra neither admitted nor denied the SEC’s allegations, agreed to a preliminary injunction restraining Abra from violating the registration provisions of the Securities Act and the Investment Company Act, and required the company to pay a civil penalty in an amount to be determined by the court.”
According to the SEC, Abra Earn attracted approximately $600 million in cryptocurrency assets, $500 million of which came from U.S. customers.
“Abra allegedly sold nearly $500 million worth of securities to U.S. investors without complying with registration laws that require investors to have sufficient information to make informed decisions before investing,” Stacy Bogert, director of the SEC’s Division of Enforcement, said in a statement. “To further compound the potential harm to investors, Abra is accused of selling its own securities in a manner that circumvents provisions of the Investment Company Act that provide investors with a number of important protections, including those designed to minimize conflicts of interest.”
In a statement to The Block, an Abra spokesperson said:
“Abra subsidiary Plutus Lending LLC (“PLL”) has agreed to settle a lawsuit brought by the SEC regarding Abra Earn, a service that was discontinued in 2022. PLL admits no wrongdoing and agrees to continue to comply with the securities laws. There was no harm to consumers as a result of the settlement or closure of Abra Earn. All assets of U.S. Earn customers, including accrued interest, were transferred to Abra Trade accounts in 2023. Abra continues to operate in the United States through Abra Capital Management, an SEC-registered investment adviser.”
As The Block previously reported, the Texas Securities and Exchange Commission brought an enforcement action against Abra Earn in June 2023, alleging securities fraud against Abra and its CEO.
UpdatedMonday, August 26, 19:47 UTC: Added statement from Abra and clarified that this is the agreement for 2020 rates.
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