Abra, the crypto-based financial app, has settled a total of $300k with the U.S Commodities Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC) as per an announcement by both financial watchdogs on July 13. However, the firm did not deny or accept security laws violation charges brought forward by both agencies.
The SEC and CFTC had filed charges against Abra and its Philippine affiliate, Plutus, citing violations in their U.S market operations. According to the SEC, Abra offered unregistered security-based swaps to retail investors and failed to check the eligibility of participants:
“The order finds that Abra marketed its app to retail investors, yet Abra took no steps to determine whether users who downloaded the app were “eligible contract participants” as defined by the securities laws.” reads the SEC press release.
CFTC, on the other hand, charged Abra with facilitating illegal off-exchange swaps based on digital currencies:
“Entering into illegal off-exchange swaps in digital assets and foreign currency with U.S. and overseas customers and registration violations.”
It’s not the first time Abra has found itself at cross paths with the U.S regulators. Last year, the firm had, halted its operations following an SEC warning but resumed shortly after having ‘cut off’ U.S retail investors.
Records, however, show that Abra’s activities were still run from California and partly covered the U.S market despite the SEC threat. Daniel Michael, the SEC Enforcement Division’s Complex Financial Instruments Unit Chief, has since emphasized the underlying obligations in such a case:
“Businesses that structure and effect security-based swaps may not evade the federal securities laws merely by transacting primarily with non-U.S. retail investors and setting up a foreign entity to act as a counterparty while conducting crucial parts of their business in the United States.”
SEC and CFTC Combined Efforts
The two regulatory agencies have been working together as more digital assets seek to launch in the promising U.S retail market. Just recently, the CFTC chairman said that the listing of more crypto-based derivatives is pegged on SEC’s decisions on commodity classifications. That said, Abra’s case is the latest to reveal a combined effort by both agencies to protect U.S consumers. James McDonald, CFTC Director of Enforcement, acknowledged the progress in collaboration with the SEC so far:
“This case underscores, once again, that the Commission will continue working with our regulatory partners to ensure the integrity of our markets, including those involving digital assets.”