Without any appeal or argument, Abra has agreed to pay any penalty determined by the court.
The United States Securities and Exchange Commission (SEC) has filed a case against Abra for not registering the sale of Abra Earn, its cryptocurrency lending product, and for operating as an unregistered investment company in the country. Abra has not admitted to or denied the charges. Instead, it has consented to the warning and must pay a fine, which has yet to be decided by the court.
Abra Launches Abra Earn Unregistered
According to the SEC, Abra began selling its investment product, Abra Earn, to U.S.-based investors around July 2020. The platform allowed investors to deposit their cryptocurrencies for an unfixed interest rate. The agency revealed that Abra used the crypto assets deposited by investors for various activities that yielded profits, which it used to fund interest payments. The complaint claimed that “Abra Earn was offered and sold as a security and that the offers and sales did not qualify for an exemption from SEC registration.”
As revealed by the complaint, Abra operated in the U.S. for at least two years without official registration as an investment company. During this time, it issued securities to investors, held more than 40% of its assets in securities, and lent various crypto assets to institutional borrowers. However, around June 2023, the company told U.S.-based Abra Earn investors to withdraw their funds.
SEC Files Charges Against Abra
The financial agency noted that it had thoroughly investigated the Abra case and charged the company with violating the country’s Security and Investment Company Act laws.
“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. 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,” Associate Director of the SEC’s Division of Enforcement, Stacy Bogert, said.
Abra has not appealed or pleaded guilty to the charges. The firm has acceded to an order restraining it from violating laws and requiring it to pay any penalties imposed by the U.S. District Court of Columbia.