The Texas State Securities Board has recently issued an emergency cease-and-desist order against crypto lender Abra, alleging the company has been insolvent since at least March 31, 2023. In a filing, the Texas regulator detailed enforcement actions against Abra and its founder, William Barhydt, accusing them of securities fraud and deception related to the sale of investment products through affiliates Abra Earn and Abra Boost.
According to the filing, Abra made misleading offers of investments in Abra Earn, which contained statements “likely to deceive the public.” Similar claims were made about other Abra products. Furthermore, the alleged misconduct includes intentional concealment of financial information, defaults on loans, and the transfer of assets to Binance, a platform that itself is facing legal trouble with the US Securities and Exchange Commission.
One notable accusation against Abra is the significant amount of digital assets transferred to Binance – over $118 million as of February 2023. Moreover, the company had previously asserted that it would cease the sale of Abra Earn investments in October 2022, which it failed to do.
Founded in 2014, Abra is among the oldest crypto lenders in the market, with over $116 million of assets under management for Abra Earn and Abra Boost investors as of May this year. However, the Texas State Securities Board’s filing claims Abra was at the brink of insolvency as early as late March 2023. The company reportedly held less than $30 million in Babel Finance, $30 million in Genesis (owned by Digital Currency Group), and $10 million in Three Arrows Capital at the time. It should be noted that all these entities are currently in the process of either liquidating or undergoing bankruptcy.
The troubled state of Abra serves as a reminder of the numerous other major crypto lenders that have collapsed over the past two years, such as Celsius, BlockFi, and Genesis’s crypto lending unit. Meanwhile, Nexo, one of the few remaining stable crypto lending companies, recently agreed to pay a total of $45 million to settle charges that it violated investor-protection laws.
With all these developments in the crypto lending space, it begs the question of whether or not existing regulations are sufficient in ensuring the safety of investors. While crypto lenders have provided significant value for the industry, many have struggled with risk management and solvency, leading to their collapses. Such incidents highlight the importance of balancing innovation in the lending space with prudent regulatory oversights to uphold the best interests of investors and other stakeholders.
Source: Cryptonews
