Abra Faces Securities Fraud Allegations and Cease & Desist Order

Texas State Securities Board has hit crypto trading platform Abra and its CEO, Bill Barhydt, with securities fraud allegations. The agency filed an emergency cease and desist order for allegedly misleading investors and engaging in deceptive market practices.

The board has got Abra’s handling of the crypto interest accounts and Abra Earn program on its radar.

Abra Hit With Securities Fraud Allegations

Abra is a digital asset financial platform based in the U.S. Apart from trading, it allows investors to generate yield on crypto. Now, the Texas state regulator has accused it of fraud and misleading investors.

This was allegedly due to sales of investments in Abra Earn and Abra Boost crypto interest accounts. According to the enforcement action, Abra managed approximately $116.79 million in assets for U.S. investors through these programs.

Additionally, the regulator claims that Abra secretly transferred assets to Binance Holdings Ltd. and concealed the financial information. Binance is already facing at least 13 charges in a lawsuit filed by the U.S. Securities and Exchange Commission. Binance, its U.S. affiliate BAM Trading, and founder Changpeng Zhao were charged with numerous violations of securities laws.

Meanwhile, the Texas State Securities Board also levels allegations of securities fraud against Abra in its filing. The board claims that Abra intentionally concealed financial information, including defaults on loans and the transfer of assets to Binance.

The regulator also alleges that Abra was insolvent or nearly insolvent as of March 31, 2023, further questioning the company’s financial stability for the investors.

Plans to Expand Into Banking

Abra has had previous encounters with regulators. In 2020, the SEC filed charges against the California-based company and a related firm in the Philippines. The charges alleged that they offered and sold security-based swaps to retail investors without proper registration and failed to transact on a registered national exchange.

The actions prioritize the return of assets to investors over monetary penalties or any other relief.

In 2021, Abra secured $55 million in Series C funding led by IGNIA and Blockchain Capital. The following year, the company announced plans to launch Abra Bank and Abra International as the first regulated U.S. bank to support crypto transactions.

Texas State Securities Board, on the other hand, has been leading a working group of state securities regulators through the North American Securities Administrators Association (NASAA). This group has taken enforcement actions against other issuers of cryptocurrency depository accounts, such as BlockFi, Celsius Network, Voyager Digital, and Nexo.

As the case progresses, it remains to be seen how Abra will respond to the enforcement actions and defend against the allegations made by the Texas regulator.