SEC Charges Abra with Unregistered Offers and Sales of Crypto Asset Securities

The Securities and Exchange Commission today filed settled charges against Plutus Lending LLC, which does business as Abra, for failing to register the offers and sales of its retail crypto asset lending product, Abra Earn. The SEC also charged Abra with operating as an unregistered investment company.

According to the SEC's complaint, in or around July 2020, Abra began to offer and sell Abra Earn in the United States. Abra Earn allowed U.S. investors to tender their crypto assets to Abra in exchange for Abra's promise to pay a variable interest rate. At its height, the Abra Earn program had approximately $600 million in assets, with nearly $500 million from U.S. investors. The complaint alleges that Abra marketed Abra Earn as a means for investors to earn interest on their crypto assets "auto-magically," and that Abra exercised its discretion to use investors' crypto assets in various ways to generate income for itself and to fund interest payments. The complaint further alleges 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.

The SEC's complaint also alleges that Abra operated for at least two years as an unregistered investment company because it issued securities and held more than 40 percent of its total assets, excluding cash, in investment securities, including its loans of crypto assets to institutional borrowers. According to the complaint, in June 2023, Abra began winding down the Abra Earn program and told its U.S.-based Abra Earn customers to withdraw their crypto assets.

"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 Division of Enforcement. "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. This matter reflects yet again, that in conducting enforcement investigations, we are governed by economic realities, not cosmetic labels."

The SEC's complaint, filed in the U.S. District Court for the District of Columbia, charges Abra with violating Sections 5(a) and 5(c) of the Securities Act of 1933 and Section 7(b) of the Investment Company Act of 1940. To settle the Commission's charges, Abra, without admitting or denying the SEC's allegations, has consented to an injunction prohibiting it from violating the registration provisions of the Securities Act and the Investment Company Act and requiring it to pay civil penalties in amounts to be determined by the court.

The SEC's investigation was conducted by Brittany Frassetto and Kevin Hayne under the supervision of Pei Y. Chung and Ms. Bogert. The litigation will be led by Zachary Avallone and supervised by Christopher Bruckmann.

The SEC's Office of Investor Education and Advocacy and Enforcement's Retail Strategy Task Force has previously issued an Investor Bulletin on Crypto Asset Interest-bearing Accounts. Investors can find additional information about crypto assets at Investor.gov.