Crypto Platform Abra to Return Up to $82M to Users After State Regulators Find Licensing Lapses
On Wednesday, June 26, 2024, the Conference of State Bank Supervisors (CSBS) announced that 25 state financial regulators had settled with Abra, a cryptocurrency company, and its CEO William “Bill” Barhydt over operating without proper state licensing.
According to the CSBS press release, the states involved in the settlement included Arkansas, Connecticut, Georgia, Ohio, Oregon, Texas, Vermont, and Washington. A multistate workgroup from these states investigated Abra and found that the company had been operating a mobile application for buying, selling, trading, and investing in cryptocurrency without obtaining money transmitter licenses required by state law.
Led by the Washington State Department of Financial Institutions, the workgroup negotiated settlement terms with Abra and Barhydt. As part of the settlement, Abra agreed to stop accepting virtual asset allocations from U.S. customers into its trading platform as of June 15, 2023. Abra is also required to refund any remaining cryptocurrency balances held by its U.S. customers in the settling states.
In total, it is estimated that up to $82.1 million in virtual assets will be returned to Abra consumers once the settlement terms are fulfilled. In lieu of monetary penalties that could have totaled $250,000 per state, the participating states agreed to facilitate the return of customer funds through the settlement.
Additionally, as part of the settlement, Barhydt agreed not to participate in any money transmission or money services business licensed in the settling states for the next five years, other than as a passive investor.
The investigation that led to the multistate settlement was a joint effort between state financial regulators and securities regulators. According to CSBS Chair and Washington State Director Charlie Clark, state regulators take enforcing licensing requirements seriously to protect consumers from unlicensed activity.
Most states require companies transmitting cryptocurrency to obtain a money transmitter license through the Nationwide Multistate Licensing System. Currently 37 states license virtual currency companies, with a handful only requiring licenses when fiat currency is involved. CSBS reported that state regulators initially learned of Abra’s unlicensed activity from a referral by state securities regulators last summer.
A multistate workgroup comprising of regulators from eight states then investigated Abra further. They determined the company had likely violated money transmission laws. The workgroup commenced settlement negotiations with Abra and its CEO to resolve the matter.
The settlement represents the latest coordinated enforcement action by state regulators against unlicensed cryptocurrency companies. In their role overseeing non-bank financial institutions, state banking departments license and supervise more than 33,000 entities providing services like money transmission, lending, and collections.
Going forward, any Abra customers with remaining questions about the settlement or who believe they were impacted by the company’s unlicensed operations should contact their state regulator. Consumers can also use the Nationwide Multistate Licensing System to check if a company holds valid licenses in their state.
