On July 13, The U.S. Securities and Exchange Commission released a press release concerning charges against Abra, an international cryptocurrency investing app.
According to the SEC, the financial organization has violated U.S. securities law by offering security-based swaps to non-native retail investors without transacting them to any registered national exchange. Moreover, Abra took no action to determine whether users who downloaded the app were eligible contract participants and tried evading U.S. law by moving most of their operations abroad.
Abra is marketed as an all-in-one cryptocurrency wallet and exchange application that allows users to buy, sell, and hold 25 cryptocurrencies and 50 fiat currencies in one place, supporting multiple cryptocurrency assets.
In February 2019, the company started providing synthetic services to both U.S. and foreign investors. After conversations with SEC staff, the company stopped offering such contracts but later in May resumed the illicit activities.
“Businesses cannot ignore the registration requirements designed to provide investors with the information necessary to evaluate securities transactions,” said Daniel Michael, Chief of the SEC Enforcement Division’s Complex Financial Instruments Unit.
After expressing his concern towards the legality of Abra’s recent activities, the head of the unit added:
“Further, businesses that structure and effect security-based swaps may not evade the federal securities laws merely by transacting primarily with non-U.S. retail investors and setting up a foreign entity to act as a counterparty, while conducting crucial parts of their business in the United States.”
As SEC’s order found out that Abra and Plutus Technologies violated federal securities law provisions, the companies were charged with paying a combined monetary penalty of $150,000. Moreover, they were forced to move certain security-based swaps on a registered national exchange.
The Commodity Futures Trading Commission (CFTC) also sanctioned the two firms based on their illegal off-exchange trading and registration violations. Another fine of $150,000 was settled without the companies publicly admitting or denying the charges.
In an official press release, the Director of Enforcement for CFTC, James McDonald, said that the Commission will continue to work with their regulatory partners to ensure the integrity of American markets. The institution also acknowledged the assistance of the SEC in the matter and expressed gratitude towards the agents leading the case.