SEC, CFTC Hit Crypto App Abra With $300K in Penalties Over Illegal Swaps
The financial regulators both found fault with Abra offering security-based swaps without first checking to see whether investors were eligble.
Jul 13, 2020 at 3:05 p.m. UTCUpdated Aug 19, 2021 at 3:03 a.m. UTC
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Crypto financial app Abra has settled charges from the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) relating to its offering of swaps deemed unlawful by the regulators.
- The SEC formally charged Abra and Plutus with selling security-based swaps to retail investors without registering or selling them on a recognized national exchange.
- Meanwhile, the CFTC charged both with entering into illegal off-exchange swaps with U.S. and overseas citizens.
- Abra and Plutus have agreed to settle both suits, $150,000 each, without admitting to or denying the accusations of the order.
- Abra launched as a bitcoin remittance app in 2014 and has upped the number of crypto-related services to include more coins and other services over the years.
- The SEC found fault with Abra for offering retail investors contracts that provided synthetic exposure to the U.S. stock market. While not actually securities, the SEC says security-based swaps were nonetheless subject to U.S. securities law.
- Abra started offering the swaps in February 2019.
- Both the SEC and CFTC said the company did nothing to check whether investors were actually eligible.
- Abra briefly shut down the offering after a warning from the SEC early in 2019; it resumed it in May of that year after it limited the service to non-U.S. residents.
- Although Abra moved some of its operations overseas, most of the contracts were still designed and marketed from the company's headquarters in San Francisco.
- Overall, Abra has raised more than $45 million in a series of venture capital rounds; the Stellar Development Foundation (SDF) invested $5 million into Abra in May.
- Plutus Financial, which conducts business as Abra, received between $350,000 and $1 million in U.S. "PPP" bailout loans in April.
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