Unlicensed cryptocurrency company Abra faces settlement with 25 states for unauthorized operations
In a significant development, the crypto trading platform Abra has agreed to repay up to $82 million in assets to customers as part of a settlement with 25 state financial regulators. The settlement, announced by the Conference of State Bank Supervisors (CSBS), aims to resolve claims against Abra for operating without the required money transmission licenses and engaging in unregistered securities activity.
The issues arose because Abra, through its app, offered crypto trading and lending services in the U.S. without proper state licenses, violating multiple regulatory requirements across jurisdictions. Investigations revealed that the platform misled investors about its financial health, held significant failed loans in defaulted hedge funds, and deceptively marketed its yield products as securities without registration.
The settlement came as a result of Abra's alleged securities fraud, concealed insolvency, and repeated regulatory violations, leading to cease-and-desist orders and a recall of customer funds. Both sets of regulators, state banking and state securities, worked together to resolve the issue with Abra.
The states participating in the settlement include Alaska, Alabama, Arizona, Arkansas, Connecticut, District of Columbia, Georgia, Idaho, Iowa, Maine, Minnesota, Mississippi, Nevada, New Mexico, North Carolina, North Dakota, Ohio, Oregon, Rhode Island, South Carolina, South Dakota, Texas, Vermont, Washington, and West Virginia. Each state agreed to forgo imposing a monetary penalty of $250,000 per jurisdiction to ensure customer repayment.
Abra's CEO, Bill Barhydt, has been personally barred from involvement in any money transmitter or money services business in those states for the next five years. In response to the settlement, Barhydt posted on Twitter that it was "business as usual at Abra" and that no penalties are being paid as part of this agreement, as no users were harmed in any way.
As of the statement, over 99% of funds have been claimed from Abra, totaling more than $250M in assets. Abra has returned all but approximately $2M waiting to be claimed from Abra App users in the U.S. It's important to note that the press has reported incorrectly on the situation regarding Abra's repayment to customers.
The CSBS takes its role to protect consumers and prevent unlicensed activity seriously. The unlicensed operation was learned by the states last summer, according to the CSBS, through referrals from state securities regulators who were investigating unregistered securities activity. The settlement was related to Abra Earn, a service that was stopped over a year ago in the U.S.
Despite these issues, Abra Private, a service for private clients, and Abra Prime, a service for institutional investors, are both fully operational in the U.S. Abra launched Abra Prime and Abra Private in April. The crypto trading platform shut down its U.S. app last June and stopped accepting crypto from U.S. Abra Trade customers and stopped making crypto available in the U.S. for buying, selling, or trading.
The conference urges all crypto platforms to operate within the law and obtain necessary licenses to protect consumers and prevent unlicensed activity. This settlement serves as a reminder of the importance of regulatory compliance in the crypto space.
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