Texas State Regulator Allege Crypto-based Lender Abra Insolvent Since March
The Texas State Securities Board alleges that Abra has misled stakeholders over its solvency. The state regulator issued an immediate cease-and-desist order to Abra it identifies as Plutus Financial.
The Texas regulator accuses Abra of dishonesty over its financial health. It indicates that the lender, also identified as Abra Boost or Plutus Lending, became insolvent at the end of March. It adds that Abra, now battling bankruptcy, held crypto assets worth tens of millions.
Abra Accused of Securities Fraud and Deceptive Statements
The statement issued by the Texas Securities Board on Thursday, June 15, details that Abra perpetrated securities fraud by misleading the public for several months. It asserts that the firm founded by William Barhydt was already insolvent when offering various investments, including Abra Boost and Abra Earn.
The regulator emphasizes that the investment offerings relied upon falsified statements that misled the would-be investors on the firm’s financial health. It decries the use of deceptive statements that materially mislead the public when offering Abra Earn. The Texas Securities Board submitted that the crypto lender leveraged similar statements to offer other Abra products.
Abra Secretly Transferring Crypto Assets
The filing demonstrates that Respondent Plutus Lending and Abra Trade have, in their operations, secretly remitted crypto assets to Binance.com (DBA Binance). The transfer of cryptos to Binance Holdings Limited was valued at $118.582 million as of February 2023. The filing outlines that the recipient Binance.com is embroiled in a high-profile lawsuit initiated by the US Securities and Exchange Commission (SEC) earlier in June.
The filing acknowledges that the crypto lending platform has existed for nearly a decade. It adds that the lending company in 2022 is projected to offer crypto rewards via the American Express card. Besides, Barhydt had declared that Abra was mulling launching a state-chartered bank in 2023. The strategic plans are on hold as the company battles the shackles of bankruptcy.
The state regulators admitted they plan to hold hearings on Abra’s bankruptcy and deceptive statements. The regulators are yet to schedule the hearing. Nonetheless, the filing detailed that Abra and affiliates are obligated to allow customers to withdraw their funds.
Abra Millions Scattered in Firms Battling Liquidation
The filing submitted by the regulator recognizes that Abra claims Babel Finance as slightly under $30 million. The crypto lender claims $30 million owed by Genesis – a subsidiary of Digital Currency Group.
The regulator detailed that another $10 million is owed by the bankrupt Three Arrows Capital (3AC). The filing acknowledged that the companies are in varying liquidation processes. Also captured in the submission is the $8.8 million claim in Auros Tech Limited that recently overcame the liquidation process that started in 2022.
Barhydt Never Disputed Insolvency Finding in March Interview
The regulators state that they interviewed Barhydt on March 31 this year and discovered Abra’s insolvency status. The regulators indicate that Barhydt hardly contested the conclusion of the firm’s insolvency finding.
The filing annexed to the cease-and-desist order cites the discovery that the parties collectively identified as Abra had, on the interview, struggled with insolvency. The filing indicated the possibility of the Abra affiliates operating nearly insolvent.
The regulators lament that Plutus Financial Holdings Inc or affiliates misled the public in a post on its social media platform dismissing the discovery of Abra’s insolvency. In particular, the post dismissed Abra’s bankruptcy or looming insolvency. It assured the public of its going concern to operate normally just as it executed business in various bear markets since launching in 2014.
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