Abra Settles With SEC for Offering Unregistered Crypto Securities
Abra has settled with the SEC. (Tom Williams/CQ-Roll Call, Inc via Getty Images)
Key Takeaways
- Crypto lending platform Abra has decided to settle with the SEC for offering unregistered crypto lending services.
- SEC has charged multiple platforms over the years for offering crypto lending services without the necessary approval.
- The likes of Coinbase are fighting against the SEC’s imposition of securities law on crypto staking services.
On Aug. 26, crypto lending platform Abra agreed to resolve charges with the US Securities and Exchange Commission (SEC), ending a contentious dispute that accused the company of illegally offering retail crypto lending products without regulatory approval.
As part of the agreement, the court will impose an injunction and civil penalties on Abra for violating securities laws and failing to register as an investment company.
SEC Charged Abra For its Unregistered Earn Program
The SEC’s Monday filing revealed that Abra’s Earn program, which started in July 2020, allowed US investors to deposit their crypto assets with Abra in exchange for a variable interest rate. The SEC alleged that Abra offered and sold its Earn program as a security.
According to the securities regulator, any product offering with a promise of a return or expectation of a profit constitutes security and thus needs approval from the regulator before offering.
Abra operated its earn program for over two years before winding down the business in June 2023 and asked its US investors to withdraw their funds. At its peak, the earn program held $600 million in assets, of which $500 million came from US investors.
Stacy Bogert, Associate Director of the SEC’s Division of Enforcement, said that Abra allegedly sold its securities while skirting applicable Investment Company Act provisions that provide several vital protections to investors.
“This matter reflects that we are governed by economic realities, not cosmetic labels, in conducting enforcement investigations.”
SEC’s Long-Running Quest Against Crypto Lending Programs
Over the years, the US SEC has charged multiple crypto firms for offering crypto lending services to customers without the securities regulator’s approval.
While the SEC claims that crypto lending services violate securities law, several mainstream crypto platforms, such as Coinbase, have argued against the securities regulators’ verdict.
In 2021, Coinbase revealed that it received a Wells notice from the SEC claiming its upcoming lending product might attract the regulators’ ire. In June 2023, the SEC charged Coinbase with violating the Securities Act for its staking-as-a-service program.
Coinbase, on the other hand, claimed that staking in crypto fundamentally differs from the lending products in the traditional market.
The crypto exchange said every major blockchain relies on staking for transaction validation and network security. Thus, crypto staking doesn’t violate the US Securities Act.
Similarly, another major U.S.-based crypto exchange, Kraken, had to shut down its on-chain staking services after the SEC charged it with violating securities law. The exchange eventually settled with the SEC in Feb. 2023 for $30 million.
Leading crypto wallet platform MetaMask has become the SEC’s newest adversary .
The SEC has levied charges against MetaMask, alleging that its staking services constitute unregistered securities and that its Swap feature facilitates unauthorized broker-dealer activities.
Firing back, Consensys, MetaMask’s parent company, has petitioned for an expedited trial in Texas, seeking to swiftly resolve the dispute.
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