State securities regulators claimed on Thursday that Abra, a cryptocurrency lender, has been facing insolvency since March 31, 2023.
The Texas State Securities Board has issued an emergency cease-and-desist order accusing Abra (also known as Plutus Financial), Abra Boost, Plutus Lending, and William Barhydt, the founder of Abra, of deceiving the public, committing securities fraud, and operating an insolvent company for several months. Barhydt has not responded to the request for comment at the moment.
According to the regulator, Abra provided investment opportunities in Abra Earn and Abra Boost; however, the investment offerings included misleading statements.
The filing stated that Abra had offered investments in Abra Earn in Texas, which included statements that were either materially misleading or had the potential to deceive the public. The filing further mentioned that similar statements were made regarding other products offered by Abra.
As per the filing, Abra Trade and Plutus Lending, the respondent, have been transferring their assets to Binance Holdings Limited, which is also known as Binance or Binance.com, without disclosing this information. The filing further revealed that as of February 2023, the assets of Abra Trade and Plutus Lending were valued at $118,581,732 on Binance.com. The filing also highlighted that the U.S. Securities and Exchange Commission has filed a lawsuit against Binance in the current month.
Abra is a cryptocurrency lending company that has been in existence for almost a decade. In the previous year, the company declared its intention to provide cryptocurrency rewards by partnering with American Express to offer a card. Additionally, Barhydt had mentioned that the company would attempt to establish a state-chartered bank at some point in 2023.
The regulators aim to conduct a hearing pertaining to the matter, although a schedule for the same has not been finalized yet.
As per the filing, Abra and its affiliated entities are authorized to permit customers to withdraw funds until further notice.
The regulator has reported that Abra has approximately $30 million on Babel Finance, $8.8 million on Auros Tech Limited, $30 million on Genesis (which is owned by Digital Currency Group, the parent company of CoinDesk), and $10 million on Three Arrows Capital. All of these companies are undergoing different liquidation or bankruptcy procedures.
The regulators conducted an interview with Barhydt on March 31, 2023, during which they presented evidence indicating that Abra was insolvent. The filing stated that Barhydt did not dispute the findings.
The filing stated that “as of the date of the interview, the entities working together under the name of Abra were either insolvent or on the verge of insolvency.” Despite this, Plutus Financial Holdings, Inc., or one of its affiliated or subsidiary companies, shared a message on an authorized social media platform refuting the claim of Abra being bankrupt or on the verge of bankruptcy. The message stated that Abra continued to function normally, as it had since its inception in 2014, despite having faced multiple bear markets.
