Abra, along with its CEO William “Bill” Barhydt, recently reached a settlement with 25 US state regulators for providing crypto trading services without the necessary licenses. The settlement, as announced by the Conference of State Bank Supervisors (CSBS) on June 26, involved the agreement to forego monetary penalties in exchange for $82 million in customer repayments. Additionally, Abra agreed to cease accepting crypto allocations from US customers by June 15, 2023, and to refund all US customer balances. Barhydt, as part of the settlement, is prohibited from participating in money services businesses without the required licensing in the states involved, although he can remain as a passive investor for five years.
Washington was the first state to release its consent order, revealing that 706 users in the state still had a balance of $116,000.78 on the platform. The state also mentioned that customers have already received $13.6 million in repayments. The CSBS emphasized the roles of Arkansas, Connecticut, Georgia, Ohio, Oregon, Texas, and Vermont in the settlement, with 18 other states, including Washington, also taking part. The remaining states are expected to issue their consent orders in the coming weeks or months, and more may join the settlement as the case progresses.
Abra began winding down its operations in the US in June 2023, discontinuing services for US app users and ceasing various consumer services. However, the company clarified that its operations outside the US were unaffected. Recent reports suggest that Abra Capital Management, the firm’s institutional service, continues to operate in the US and is registered with the Securities and Exchange Commission (SEC). The decision to wind down in the US was prompted by state securities regulators informing money services business (MSB) regulators of Abra’s activities in mid-2023, leading to the pursuit of settlements. Notably, the Texas State Securities Board issued an emergency cease and desist order against Abra for its interest-bearing products, resulting in a settlement in January. Similarly, New Mexico’s securities regulator resolved its issues with Abra in April.
The Abra settlement serves as a stark reminder of the importance of regulatory compliance in the cryptocurrency and financial services industry. Failing to obtain necessary licenses and operating within the established legal framework can lead to hefty penalties, reputational damage, and operational disruptions. Companies must prioritize compliance efforts, stay informed about regulatory requirements, and proactively address any potential issues to avoid similar pitfalls. It is crucial for businesses operating in the crypto space to understand and adhere to the evolving regulatory landscape to ensure long-term sustainability and success.
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