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  Government Action: BBB reports on known government actions involving business’ marketplace conduct:

  Maryland AG vs Abra
  

  Maryland Attorney General Anthony G. Brown’s Securities Division announced that it has filed an action against various companies, known collectively as “Abra,” and against William John “Bill” Barhydt, the founder and CEO of Abra, ordering them to cease and desist violating Maryland law in connection with the offer and sale of investments in two interest-bearing crypto depository accounts: Abra Earn (“Earn Offerings”) and Abra Boost (“Boost Offerings”). The Securities Division alleges that Abra and Barhydt committed fraud in connection with these Offerings. The Division further alleges that Abra failed to register their Earn Offerings. 

  “Marylanders are entitled to honesty and integrity when dealing with investment entities so that they can make informed decisions about where to entrust their hard-earned money,” said Attorney General Brown. “Misleading customers while promising high returns cheats investors and undermines public confidence in financial services. We will seek justice for those impacted by the harmful and far-reaching consequences of Abra’s alleged wrongdoing.” 

  Abra’s Earn and Boost Offerings enabled investors to deposit crypto assets, which are virtual currencies, into accounts with Abra. In exchange, customers automatically earned interest on those deposits. Abra offered investors interest rates of up to 13% annually on their deposited crypto assets, significantly higher than rates offered for short-term, investment grade, fixedincome securities, or bank savings accounts. Unlike these traditional investments, Abra’s unregistered accounts are not insured and not subject to regulatory oversight designed to ensure the organization’s safety and soundness.

  The Division alleges that Abra and Barhydt misrepresented and failed to disclose important information about the Earn and Boost Offerings to its investors; most fundamentally, they failed to disclose and in fact misrepresented Abra’s own solvency (or lack thereof). In addition, Abra and Barhydt misrepresented the actual custodian in possession of certain Earn and Boost assets and failed to disclose that it instead transferred many of these assets to an entity currently subject to multiple government regulatory lawsuits and to a requested asset freeze. Finally, Abra and Barhydt failed to disclose basic information about: the identities, responsibilities, and histories of Abra, its subsidiaries, and officers and directors; the specific types of profit-generating activities that Abra engaged in; the identities, creditworthiness, solvency, and risks associated with institutional investors that borrowed from Abra Earn and Boost; the Earn Offerings’ lack of registration; the lack of registration of Abra’s custodians of Earn and Boost assets; and numerous government orders and investigations. 

  Abra and Barhydt initially offered Abra Earn to accredited and unaccredited investors residing throughout the United States, including Maryland. After being notified by regulators that Abra Earn was an unregistered securities offering, Abra and Barhydt supposedly voluntarily stopped making Earn Offerings available, but they did not return all assets to investors as required. Abra and Barhydt then began making the Boost Offerings available to accredited investors. As recently as August 2022, Abra Earn had over 20,000 investors nationally with investments over $1.3 billion, including 370 Maryland investors with $4.8 million invested. Investments have since declined. As a result, as of May 2023,Abra Earn and Boost investments combined totaled over $116 million from over 9,000 investors, with over $700,000 from 162 Marylanders. 

   

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• Government Actions:

  Government Action: BBB reports on known government actions involving business’ marketplace conduct:

  SEC vs Plutus Lending LLC
  The Securities and Exchange Commission today filed settled charges against Plutus Lending LLC, which does business as Abra, for failing to register the offers and sales of its retail crypto asset lending product, Abra Earn. The SEC also charged Abra with operating as an unregistered investment company.
  
  According to the SEC’s complaint, in or around July 2020, Abra began to offer and sell Abra Earn in the United States. Abra Earn allowed U.S. investors to tender their crypto assets to Abra in exchange for Abra’s promise to pay a variable interest rate. At its height, the Abra Earn program had approximately $600 million in assets, with nearly $500 million from U.S. investors. The complaint alleges that Abra marketed Abra Earn as a means for investors to earn interest on their crypto assets “auto-magically,” and that Abra exercised its discretion to use investors’ crypto assets in various ways to generate income for itself and to fund interest payments. The complaint further alleges that Abra Earn was offered and sold as a security and that the offers and sales did not qualify for an exemption from SEC registration.
  
  The SEC’s complaint also alleges that Abra operated for at least two years as an unregistered investment company because it issued securities and held more than 40 percent of its total assets, excluding cash, in investment securities, including its loans of crypto assets to institutional borrowers. According to the complaint, in June 2023, Abra began winding down the Abra Earn program and told its U.S.-based Abra Earn customers to withdraw their crypto assets.
  
  The SEC’s complaint, filed in the U.S. District Court for the District of Columbia, charges Abra with violating Sections 5(a) and 5(c) of the Securities Act of 1933 and Section 7(b) of the Investment Company Act of 1940. To settle the Commission’s charges, Abra, without admitting or denying the SEC’s allegations, has consented to an injunction prohibiting it from violating the registration provisions of the Securities Act and the Investment Company Act and requiring it to pay civil penalties in amounts to be determined by the court.

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