Crypto investment firm Abra Inc. and its affiliate Plutus Technologies Philippines Corp. have agreed to pay $300,000 in a settlement with both the U.S. Securities and Exchange Commission and Commodity Futures Trading Commission for offering unregistered securities-based swap transactions.

Abra offers an app that along with providing traditional cryptocurrency exchange services was also previously offering the ability to purchase contracts that reflected price movements of stocks and exchange-traded funds. The latter is where both the SEC and CTFC took an interest, claiming that the service was illegal because Abra was not registered to provide the service under U.S. law.

According to a statement today from the SEC, starting in February 2019 Abra started offering the pegged contracts to investors in both the U.S. and abroad without determining whether users who downloaded the app were “eligible contract participants” as required under U.S. securities laws. The company is said to have ceased offering the service in the same month after being contacted by the SEC before resuming it again in May 2019, the second time limiting the service to non-U.S. citizens.

Despite limiting the service to non-U.S. customers as well as setting up Plutus in the Philippines, the SEC claims that the app along with the company was still mostly run out of an office in California, meaning that it was still required to be registered to provide the service.

“Businesses cannot ignore the registration requirements designed to provide investors with the information necessary to evaluate securities transactions,” said Daniel Michael, chief of the SEC enforcement division’s Complex Financial Instruments Unit. “Further, 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.”

The CTFC allegations differ to those from the SEC in terms of laws breached, alleging that Abra between December 2017 and October 2019 accepted orders for and entered into thousands of digital assets and foreign-currency based contracts in breach of the Commodity Exchange Act. As with the SEC, the allegation came down to Abra not being registered to provide the products, in this case as an unregistered futures commission merchant.

As part of the agreement with both the SEC and CTFC, Abra has agreed to stop offering tokenized stocks and similar futures services. The company is now offering a basic cryptocurrency exchange platform and wallet service alone.

Image: Abra