Thomas Daniels
The U.S. Securities and Exchange Commission (SEC) announced on August 26 that it has reached a settlement with Plutus Lending LLC, commonly known as Abra, regarding charges of unregistered crypto offerings and operations. These charges stem from Abra’s failure to register its retail crypto lending product, Abra Earn, and for functioning as an unregistered investment company. According to the SEC’s complaint, Abra introduced Abra Earn in July 2020, enabling U.S. investors to lend their cryptocurrency assets in exchange for interest payments.
At its height, Abra Earn managed approximately $600 million in assets, with nearly $500 million sourced from U.S. investors, as detailed in the SEC’s release.
On August 12, the New Jersey Attorney General advised state investors to withdraw their funds from Abra, following the company’s decision to cease U.S. operations amid a multistate investigation into the sale of unregistered securities. As part of a settlement with New Jersey regulators, Abra was instructed to return all remaining crypto assets to investors, convert these assets into U.S. dollars, and issue refund checks for amounts exceeding $10.
This settlement aligns with previous regulatory actions in Texas, where Abra was accused of concealing critical financial information.
Details of Abra’s SEC Charges
The SEC’s allegations highlight that Abra Earn was marketed as a secure investment, despite not fulfilling the necessary registration requirements. Furthermore, Abra reportedly held over 40% of its assets in investment securities, which contravenes the Investment Company Act.
Although Abra initiated the wind-down of Abra Earn in June 2023, the SEC’s charges underscore the firm’s non-compliance with regulations intended to safeguard investors.
To resolve these charges, Abra has consented to an injunction and faces potential civil penalties, the amounts of which will be determined by the court.
This development is reminiscent of the SEC’s recent actions against Gemini Earn. In February, Genesis Global Capital, LLC agreed to a $21 million penalty to settle SEC charges for the unregistered offer and sale of securities through its crypto lending program, Gemini Earn. Following Genesis’s bankruptcy filing in January 2023, investors were left unable to access their assets, underscoring the SEC’s emphasis on the risks of non-compliance with federal securities laws within the volatile crypto market.
