The Securities and Exchange Commission (SEC) on Thursday announced its settlement with crypto lender Plutus Lending LLC, aka Abra, for $1.65 million, resolving allegations that the company violated federal securities law. The State of Texas accused Abra of misrepresenting itself as a registered investment company and of failing to register its retail crypto lending product, Abra Earn.
The SEC also charged Abra with paying $1.65 million in civil penalties and complying with a permanent injunction. The SEC said the enforcement action resulted from its ongoing effort to protect investors in a rapidly evolving cryptocurrency market, but it neither admitted nor denied the allegations.
But the heart of the SEC’s charges was Abra Earn, a program that let U.S. investors lend cryptocurrencies, putting up the coin as collateral in exchange for interest payments. Abra, according to the SEC, marketed then as a secure investment. The program had $600 million at its peak, with close to half a billion from U.S. investors.
SEC’s Action Mirrors Case Against Genesis Capital
The SEC also alleged that Abra had more than 40 percent of its assets consisting of investment securities, which violates the Investment Company Act of 1940.
The settlement comes as the SEC ramps up its crackdown on crypto lending platforms. Abra was forced by the New Jersey Attorney General in August 2024 to return cryptocurrency assets to investors and issue refunds as part of a multistate investigation.
It also parallels an SEC’s February 2024 case against Genesis Global Capital over the Gemini Earn program, which settled allegations surrounding that program. SEC’s mention of enforcement action in these serves as a reminder that the issue is unregistered securities the firms sell to retail investors.
The SEC’s settlement with Abra sends a clear signal to crypto firms: registration and disclosure regulations are non-negotiable. As cryptocurrency platforms continue to take off and attract large sums of investor money, regulators are upping their game in imposing compliance with federal securities laws.
Given the rampant speculation surrounding crypto assets, we urge investors to exercise great caution and thoroughly vet platforms that offer crypto-based investment products in an environment that is highly dynamic and volatile.
