Texas Regulators Accuse Crypto Lending Firm Abra of Securities Fraud
Texas regulators have reportedly accused crypto lending firm Abra, which had previously managed over $116 million in assets, of securities fraud and have declared it insolvent since March 31.
In an enforcement action taken on June 15, the Texas State Securities Board issued an emergency cease and desist order against Abra and its founder William Barhydt, alleging that they had committed securities fraud and deceived investors by selling investment products through their affiliates Abra Earn and Abra Boost.
The regulator stated that the alleged misconduct involves the deliberate hiding of financial data regarding the capitalization of parties, loan defaults, and the relocation of assets to Binance.
In 2014, Abra was established by Barhydt, permitting both individual and institutional investors to partake in the trading, lending and borrowing of digital currencies.
As of May 17th, 2023, Abra had a collective total of approximately $116.79 million of assets under management for Abra Earn and Abra Boost investors in the United States.
The regulator accused Barhydt and Abra of “offering investments in Abra Earn in Texas with statements that were materially misleading or were likely to deceive the public.”
Regulators stated that Abra had declared it would discontinue the sale of investments in Abra Earn by October 2022, however, this was not true. In October, Abra and its related organizations started to offer and sell investments in Abra Boost, a digital asset depository account, to accredited and institutional investors in the United States.
The state regulator has also asserted that the firm was, or was close to, being “nearly insolvent” as of March 31.
Despite an unnamed affiliate asserting on social media as of June 11 that “Abra is not bankrupt,” this has not been the case.
Cointelegraph attempted to obtain a comment from Abra and Barhydt, but there was no immediate reply.
SEC and CFTC Jointly Fine Abra for Providing Security-Based Swaps
It is “impossible” for DEXs to register with the SEC like other exchanges, according to Coinbase’s Chief Legal Officer.
On September 12th, 2022, Abra unveiled its plans to become the first U.S. banking institution to enable customers to deposit digital assets. The project was anticipated to commence at the start of 2023.
Following the collapse of FTX in November of last year, Abra took steps to reduce expenses by initiating layoffs and restructuring.
On July 13th, 2020, the SEC and CFTC jointly fined Abra $300,000 for providing “security-based swaps” to retail investors without the necessary registration, as well as for not executing those swaps on a registered national exchange.
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