Through a joint effort by two US regulators, the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), two companies have been fined $300,000. These two companies, the crypto trading app, Abra, as well as its partner, Plutus Technologies. The two entities have been fined $150,000 by both the SEC, as well as the CFTC, bringing it up to the $300K total.
Not Your Normal Scam Case
The two groups were hit with fines as a result of their offering and selling of security-based swaps, giving this offering to retail investors without the proper registration. Furthermore, the two regulators stated that the defendants had failed to transact these swaps within a registered national exchange.
Such are the glories of breaching regulator rules, is that sometimes it’s not as clear-cut as one would imagine. Sure, there’s the blatant scam, but then there’s a corporation simply overstepping their bounds.
Going To US, Then To Philippines
The issue in question came just over a year proper, when the SEC and Abra had their first confrontation. At that time, it was in regards to “Synthetic Exposure” to securities based in the US, that Abra had offered its clients. This was done by way of providing Abra’s clients investment access, doing so in a contract that mimicked the securities, all the while not actually purchasing the underlying asset, to begin with.
Due to this, an array of events took place. Firstly, the SEC officially identified Abra as offering a security-swapping service, violating its regulations. As a result, it was discovered that US-based investors were taking part in this, so Abra shut the whole thing down. In a bid to circumvent this new issue, Abra moved its operations to the Philippines, relaunching the security-swapping services shortly after, but revoked its access to US-based investors.
Rules Still Applied
Unfortunately for Abra and Plutus, it seems that the regulators had deemed their measures of banning services for US investors and moving their operations to the Philippines as unsatisfactory. The two regulators had concluded that a large portion of the operational and design aspects of this service occurred within the US, which made it still subject to US regulations.
The SEC and CFTC made independent rulings, issuing a fine each. In both cases, however, Abra and Plutus paid the fine without admitting any form of wrongdoing. The CFTC concluded that they did illegal off-exchange swaps in forex and crypto within the US and overseas, as well as registration violations. The SEC hit them for the unregistered offering and sale of security-based swaps and their failure to do these transactions on a registered national exchange.