Crypto Investment App Abra Gets Charged by SEC, Agrees to Pay $150,000

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Mon, 07/13/2020 - 15:21
Alex Dovbnya
Abra pays $300,000 to settle with the SEC and the CFTC after the two agencies announced parallel enforcement actions
Cover image via stock.adobe.com
Contents

The U.S. Securities and Exchange Commission (SEC) charged popular cryptocurrency-focused investment app Abra together with its Philipines-based partner Plutus Tech for offering its clients securities swaps, according to its recent press release.  

The company didn’t admit or deny the watchdog’s allegations but agreed to settle by paying $150,000. 

Abra had to pay the same fine to the Commodity Futures Trading Commission (CFTC) that brought a parallel enforcement action against the firm.

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Ending up in the SEC’s crosshairs  

The SEC claims that Abra didn’t take the necessary steps to find out whether retail investors who were using the app could be considered “eligible contract participants”: 

'The SEC’s order finds that Abra and Plutus Technologies violated federal securities law provisions concerning unregistered offers and sales of security-based swaps and requiring that certain swap transactions occur on a registered national exchange.'

After cooperating with the agency’s staff, Abra restricted its services only to non-U.S. investors in May 2019.

However, the SEC discovered that the company’s California-based employees were personally vetting users who could trade synthetic stocks and ETFs.  

Last June, Abra announces that its users were no longer able to hold a number of digital assets due to regulatory scrutiny.    

Robinhood-like trading

As explained by Kraken’s chief legal officer Marco Santori, this case is particularly interesting because Abra allowed Robinhood-like securities trading.

Instead of trading actual stocks, users were provided with synthetic exposure to them. 

The SEC believes that these swaps were used to essentially bet on these stocks, which Santori believes is exactly what most Robinhood users are doing

‘What do you think Robinhood users are doing all day? So what upset the SEC?’  

About the author

Alex Dovbnya (aka AlexMorris) is a cryptocurrency expert, trader and journalist with extensive experience of covering everything related to the burgeoning industry — from price analysis to Blockchain disruption. Alex authored more than 1,000 stories for U.Today, CryptoComes and other fintech media outlets. He’s particularly interested in regulatory trends around the globe that are shaping the future of digital assets, can be contacted at alex.dovbnya@u.today.


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