A company that raised US$600 million from investors worldwide for its crypto lending product has settled allegations that it violated U.S. securities rules and registration requirements.
The U.S. Securities and Exchange Commission (SEC) filed settled charges on Monday against Atlanta-based Plutus Lending LLC (PLL) — operating as Abra — which alleged that the company failed to register its retail crypto lending offering, known as Abra Earn. The regulator also charged Abra for operating as an unregistered investment company.
According to the SEC’s complaint, the company promised to pay investors interest on their deposits of cryptoassets into its Abra Earn accounts.
The company sought to generate the revenues needed to finance these interest payments by lending, pledging and using investors’ crypto as collateral in other transactions.
At its peak, there was around US$600 million invested in the accounts by 27,440 investors around the world, including more than 10,000 U.S.-based investors, the regulator noted.
The SEC alleged that these products constituted securities, which weren’t registered — and that the company operated for at least two years as an unregistered investment company by issuing securities and holding more than 40% of its total assets in investment securities.
“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 Stacy Bogert, associate director of the SEC’s enforcement division, in a release issued Monday.
“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,” she added. “This matter reflects yet again that, in conducting enforcement investigations, we are governed by economic realities, not cosmetic labels.”
The company agreed to settle the SEC’s charges, without admitting or denying the allegations. It agreed to pay civil penalties that will be determined by a court and consented to an injunction prohibiting it from violating registration requirements.
In mid-2023, Abra began winding down the program and advised investors to withdraw their assets, the SEC said.
Commenting on the settlement, a spokesperson for Abra, a subsidiary of PLL, said the company “has agreed to settle an action brought by the SEC regarding Abra Earn, a service that was discontinued in 2022” and that it agrees to comply with securities laws.
“No consumers were harmed at all by the settlement or wind down of Abra Earn. All assets for U.S. 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,” the spokesperson added in a written statement.