User deposits through the company’s Abra Earn program reached as high as $600 million.
Abra, a cryptocurrency platform, found itself under scrutiny by the U.S. Securities and Exchange Commission (SEC) due to its “Auto-Magic” Crypto Earn program. This program allowed users to earn interest on their cryptocurrency holdings, which the SEC argued could qualify as unregistered securities under federal law.
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The SEC alleged that Abra’s “Auto-Magic” Crypto Earn program was essentially offering and selling unregistered securities to its users. The program allowed users to deposit crypto assets, which were then lent out, and in return, users received interest. The SEC contended that these activities required registration under securities laws.
Rather than contest the allegations, Abra chose to settle with the SEC. The settlement involved Abra agreeing to pay a fine, without admitting or denying the charges. Additionally, the company committed to making changes to its product offerings to ensure compliance with securities regulations.
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This case highlighted the SEC’s increasing focus on cryptocurrency platforms, particularly those offering products that resemble traditional financial instruments like savings accounts or investment contracts. The outcome of the case serves as a warning to other crypto platforms about the importance of adhering to U.S. securities laws.
Post-settlement, Abra would likely need to implement significant compliance measures, including more rigorous internal controls, to ensure that its products do not fall afoul of securities regulations in the future.
This case is part of the broader regulatory landscape where the SEC is actively working to bring more clarity and enforcement to the crypto space, especially around products that might be perceived as securities.
Abra has reached a settlement with the Securities and Exchange Commission (SEC) regarding its Abra Earn lending product, which had assured users of “auto-magic” returns on their cryptocurrency investments. The funds deposited into this program were utilized by the platform to generate revenue and facilitate interest payments.
As part of the settlement, Abra is mandated to halt the disputed activities and pay civil penalties as determined by the court. This action serves as a significant warning to entities providing crypto-related earning products to American consumers without proper registration as securities.
Furthermore, Abra has previously settled with 25 states for operating without the necessary licenses and has committed to reimbursing over $82 million to customers in the United States. In addition, the company paid $150,000 each to the SEC and the Commodity Futures Trading Commission (CFTC) in 2020 to resolve an inquiry concerning its unregistered swap products.
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