Abra, a cryptocurrency investment company also known as Plutus Financial, has received an emergency cease and desist order from Texas securities regulators due to allegations of securities fraud. The order accuses Abra and its CEO, Bill Barhydt, of engaging in fraudulent activities and offering investment products to unaccredited investors. Furthermore, the company has been deemed partially insolvent since March 31, 2023.
The Texas Securities State Board took notice of Plutus Financial’s products on May 12, 2021, and warned Barhydt that these products appeared to be investment contracts or securities. Consequently, a working group was established to investigate the cryptocurrency company further.
Abra had previously disputed these allegations in its marketing, stating that users of their Earn product faced no investment-like risks when depositing digital assets. However, investigations have revealed that Plutus Financial has been promoting its risk management strategy, comparing it favorably to now-defunct companies like Voyager Digital and Celsius Network. The enforcement order also highlights that despite CEO Bill Barhydt’s claim that the company had no exposure to the FTX collapse, a Plutus Financial subsidiary had over $12 million in assets on the platform operated by Sam Bankman-Fried.
Abra is also alleged to have held or currently hold significant amounts of money on platforms such as Babel Finance, Genesis, and Three Arrows Capital (3AC), all of which have experienced bankruptcy issues in the past year.
Texas authorities contend that Abra has been winding down its Earn product and transferring assets to Trade accounts. It is further claimed that the company has been secretly moving these funds to Binance. As of February of this year, Abra’s balances on the platform were valued at approximately $118 million. Despite the warning issued, the company continued to offer and sell investment products, namely Abra Earn and Abra Boost, until around October 3, 2022. Decrypt’s request for comment from Abra went unanswered at the time of reporting. Additionally, alongside selling investment contracts resembling securities, the working group alleges that Abra made misleading statements likely to deceive the public.
Abra lists Prime Trust as its primary custodian; however, Texas authorities state that Prime Trust does not possess a money transmitter license in the state. As of May 17, 2023, Abra claims to have $49 million in assets under management (AUM) on behalf of 229 Boost investors, 23 of whom reside in Texas. The company also asserts that it holds $66 million on behalf of 9,087 Earn investors, including 827 based in Texas.
This is not the first instance of federal charges being brought against Abra. In July 2020, the SEC charged the company with selling security-based swaps without proper registration, and the CFTC charged it with engaging in illegal off-exchange swaps with overseas customers, primarily from the Philippines. Abra paid fines totaling $300,000 for these violations. Although no official hearing date has been set by Texas state authorities, customers are currently allowed to withdraw funds from the platform.