Crypto lending firm Abra, which once managed more than $116 million in assets, has been allegedly involved in securities fraud and has been insolvent since March 31, according to Texas regulators. In a June 15 enforcement action that included an emergency cease and desist order, the Texas State Securities Board accused Abra and its founder William Barhydt of committing securities fraud and deceptively selling investment products under its affiliates Abra Earn and Abra Boost. Regulators allege that the misconduct included concealing essential financial information, defaulting on loans, and transferring assets to Binance.
Abra, founded by Barhydt in 2014, provided retail and institutional investors with the ability to trade, lend, and borrow crypto assets. As of May 17, 2023, the firm collectively held approximately $116.79 million of assets under management for Abra Earn and Abra Boost investors in the United States. The regulator claimed that the offers of investments in Abra Earn in Texas contained misleading statements likely to deceive the public.
Regulators also alleged that Abra Earn continued to sell investments even after announcing that it would cease to do so in October 2022. Instead, Abra and its associated entities began offering and selling investments in Abra Boost, a digital asset depository account, to accredited and institutional investors in the United States.
The state regulator has further accused the firm of being or nearly being insolvent as of March 31. This contrasts an unnamed affiliate’s claim on social media as recently as June 11 that “Abra is not bankrupt.”
Abra had ambitious plans to become the first United States-based bank allowing clients to deposit digital assets. The venture was expected to launch at the beginning of 2023. However, following the collapse of FTX in November last year, Abra started laying off employees and restructuring to minimize overheads. Previously, in July 2020, the Securities and Exchange Commission and Commodity Futures Trading Commission issued a joint fine of $300,000 to Abra for offering “security-based swaps” to retail investors without proper registration and failing to transact those swaps on a registered national exchange.
Though there are several allegations against Abra and Barhydt, it is essential to note that regulators have not offered any official verdicts yet. The outcome of these regulatory actions will have significant implications for the future of crypto lending platforms like Abra, emphasizing the importance of transparency and proper regulatory compliance in this emerging industry.
Source: Cointelegraph
