The Texas State Securities Board has issued an emergency cease and desist order against the crypto lender, Abra, alleging that the company had been insolvent since at least 31 March 2023.

Abra Faces Enforcement Action

According to the US state regulator, Plutus Financial (commercially known as Abra), Abra Boost, Plutus Lending, and Abra's Founder, William Barhydt misled the public and committed securities fraud.

Barhydt founded Abra in 2014 and offers cryptocurrency trading, lending, and borrowing services to retail and institutional investors. It offers investment into Abra Earn and Abra Boost, which allegedly contained misleading statements.

According to the Texas regulator, Abra "made offers of investments in Abra Earn in Texas containing statements that were materially misleading or otherwise likely to deceive the public."

The platform collectively held about $116.79 million of assets under management for Abra Earn and Abra Boost investors in the United States as of 17 May.

Earlier, Abra announced that it would "cease selling investment in Abra Earn in October 2022." However, the regulator pointed out that the company did not execute that plan. Further, Abra and its affiliates "began offering and selling investments in Abra Boost, a digital asset depository account, to accredited and institutional investors in the United States."

Based on an interview with Barhydt and other shared information, the regulator concluded that Abra was insolvent in March. Barhydt also did not contest that regulatory conclusion.

"Notwithstanding the forgoing, Plutus Financial Holdings, Inc., or an affiliate or subsidiary thereof, posted information in an official social media platform that represents: 'There is no truth that Abra is bankrupt or about to be. It continues to operate [normally] like it always has throughout multiple bear markets since [it] launched [sic] back in 2014'," the filing stated.

Shady Practices?

Furthermore, the company was quietly transferring funds to Binance.com, which is facing two lawsuits in the US, one bought by the Commodity Futures Trading Commission and the other by the Securities and Exchange Commission.

"Abra Trade and Respondent Plutus Lending have been secretly transferring assets to Binance Holdings Limited DBA Binance AKA Binance.com. As of February 2023, Abra Trade and Respondent Plutus Lending had assets valued at $118,581,732 at Binance.com," the Texas regulator added.

Abra also has significant exposure to several failed crypto companies. It has under $30 million locked up in Babel Finance, $30 million in Genesis, and $10 million in Three Arrows Capital. All of these companies are in some stage of bankruptcy or liquidation.