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Maryland attorney general files cease and desist against crypto companies for alleged fraud

Editorial Team by Editorial Team
September 7, 2023
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The Maryland attorney general’s Securities Division has filed a cease-and-desist order against a group of cryptocurrency companies for allegedly violating state law. 

The companies, collectively known as “Abra,” offered and sold unregistered securities, made untrue statements and omitted material facts, and engaged in dishonest or unethical practices, according to the order filed in late July. Notably, the order alleges that Abra failed to disclose and misrepresent its own solvency, or ability to pay its debts.

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The allegations in the order include Abra’s failure to disclose basic, material aspects of its business to Maryland residents, such as the identity of Abra’s subsidiaries, affiliates, officers and directors, operational history and business repute, qualifications, and experience. The office also claims that Abra lacked registration to sell securities in the state of Maryland.

Under the Maryland Securities Act, securities must be registered or otherwise exempt or preempted. Abra’s unregistered accounts are not insured and therefore not subject to regulatory oversight, according to the order.

In October 2022, one of the companies, Plutus Financial, ceased accepting deposits from certain investors that were not verified as accredited investors, the order alleges. However, Plutus Financial failed to return assets to those investors and instead restricted new deposits and transitioned certain investors that qualified as institutional or accredited investors to a new offering, Abra Boost.

Aleithea Warmack, spokesperson for the Office of the Attorney General, said the ideal outcome would be the return of funds to investors, in addition to achieving the sanctions sought. Warmack said the office would like to see firms like Abra achieve compliance with the Maryland Securities Act’s disclosure, antifraud and registration requirements.

Prior to this order, the Texas State Securities Board filed enforcement actions in June against Abra and its CEO and founder, William Barhydt. Also in June, the New Jersey Bureau of Securities issued a similar cease-and-desist order against Abra and Barhydt.

Attorney General Anthony Brown said Marylanders are entitled to honesty and integrity when dealing with investment entities so that they can make informed investment decisions.

“Misleading customers while promising high returns cheats investors and undermines public confidence in financial services,” Brown said.

Abra at one point offered investors interest rates of up to 13% annually on deposited cryptocurrency assets, significantly higher than rates offered for short-term, investment grade, fixed-income securities, according to the Attorney General’s Office.

Barhydt could not be reached for comment Thursday.

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