The U.S. regulators SEC and the CFTC have cracked down on the innovative crypto trading platform Abra, which enables its users to trade tokenized versions of stocks. According to the SEC press release, the agency charged California-based Abra for offering and selling security-based swaps to retail investors without registration and for failing to transact those swaps on a registered national exchange.
Since 2019 the Californian Plutus Financial Inc. operated Abra (www.abra.com), a crypto trading app available for Apple and Android that enabled users to bet on price movements of U.S.-listed equity securities. Individuals were able to enter into contracts that provide synthetic exposure to price movements of stocks and exchange-traded fund (ETF) shares trading in the U.S. through blockchain-based financial transactions with Abra or with related company Plutus Technologies Philippines Corp. which is partly owned by Plutus Financial Inc.
Abra enabled users to choose securities whose performance they wanted to mirror, and the value of their contract would go up or down the same amount as the price of the underlying security. These contracts were security-based swaps subject to U.S. securities laws, the SEC argues. As a result, Abra and Plutus Tech violated Sections 5(e) and 6(1) of the U.S. Securities Act.
Without admitting or denying the findings in the order, the companies agreed to a cease-and-desist order and to pay a combined penalty of $150,000. In a parallel action, the Commodity Futures Trading Commission (CFTC) announced a similar settlement with the Plutus Group.
The companies must pay a total fine of $300,000 with $150,000 going to the SEC and $150,000 to the CFTC.