SEC Files Lawsuit Against Crypto Firm Abra for Securities Violations

On Monday, August 26, 2024, the US Securities and Exchange Commission (SEC) filed a complaint in the US District Court for the District of Columbia against Plutus Lending, LLC which does business as Abra.

The SEC alleges in the complaint that from around July 2020 until June 2023, Abra violated federal securities laws through its offer and sale of a crypto-based investment product called “Abra Earn” without registering with the SEC. According to the complaint, Abra offered and sold securities in the form of “investment contracts” by encouraging individuals to place various cryptocurrencies into Abra Earn accounts in exchange for interest payments. However, Abra did not file registration statements with the SEC for these offerings as required by law.

The SEC further alleges that from December 2020 to December 2022, Abra met the definition of an “investment company” under the Investment Company Act of 1940 but failed to register as such. The complaint states that during this period, Abra was in the business of investing and holding investment securities worth over 40% of its total assets. Additionally, from July 2020 to October 2022 when it ceased taking on new investors, Abra acted as its own underwriter by distributing thousands of Abra Earn accounts to the public according to the SEC.

As outlined in the complaint, investors using the Abra mobile app could open Abra Earn accounts and deposit various cryptocurrencies in exchange for periodic interest payments from Abra. Their crypto assets would be pooled into a central account controlled by Abra, which then used the funds for lending and other revenue-generating activities. By sharing profits with investors, Abra created a reasonable expectation of profits derived from the efforts of others, according to the SEC.

The SEC is seeking permanent injunctions to prevent future violations of federal securities laws, as well as civil monetary penalties.

Please contact BlockTribune for access to a copy of this filing.