The Securities and Exchange Commission announced that it filed charges against a “crypto bank” that claimed depositors could earn returns “auto-magically.”

Details: The SEC filed charges against Plutus Lending LLC, which does business as Abra, for failing to register the offers and sales of its retail crypto asset lending product, Abra Earn. The SEC also charged Abra with operating as an unregistered investment company, alleging that the offers and sales did not qualify for an exemption from SEC registration.

Background: Beginning in 2020, Abra Earn allowed U.S. investors to tender their crypto assets to Abra in exchange for Abra’s promise to pay a variable interest rate. At its height, the Abra Earn program had approximately $600 million in assets, with nearly $500 million from U.S. investors.

Other Actions: The SEC charges follow a similar action against Abra initiated by state regulators that led to the return of $82 million to U.S. consumers. Additionally, the FDIC has reiterated that cryptoassets and crypto entities are not protected with FDIC insurance.

ICBA View: ICBA last year expressed support for the SEC’s proposal to confirm that crypto exchanges are included in its definition of “exchange” and for International Organization of Securities Commissions policy recommendations calling on regulators to consider cryptoassets to be regulated financial instruments. A Main Street Matters blog post discusses the debate over whether cryptoassets are securities or commodities.