- The US Securities Exchange Commission has charged an application development company, Abra for offering security-based swaps without complying norms for registration.
- California-based Abra developed and marketed an application wherein users were able to place bets on listed securities on the US exchange.
The US Securities Exchange Commission has charged an application development company, Abra for offering security-based swaps without complying norms for registration. Furthermore, a national exchange was also not used to transact those swaps. California-based Abra developed and marketed an application wherein users were able to place bets on listed securities on the US exchange. Firstly, the swaps were not registered, and secondly, they were not transacted via a proper medium.
Usage of blockchain technology to carry out illegal swaps
Abra and its accomplice Plutus Technologies Philippines Corp used blockchain-based technology to sell contracts to potential investors. The contracts were made on US security swaps that are traded on the national exchange. The returns on the contracts were directly related to the price movements of the securities on the exchange. Investors were able to mirror the performance of their favorite stocks and earn supernatural profits. There was no specific background check of investors and the contracts were sold to US citizens and as well as foreigners. After a two month hiatus and confrontation with SEC earlier last year, the company started selling the swaps to only foreigners living in the States.
Several stock prices were, thus, affected by the illegal activities committed by the two companies. Abra stated that a few activities were shifted out of the company but its employees in California had a major role to play in stock price manipulation.
A strong message to companies indulging in such activities
The SEC slapped a $150,000 penalty on both the firms to execute a cease and relinquish order. Federal securities law provisions were violated as certain swaps are required to be transacted on a recognized exchange. Daniel Michael, the Chief of the SEC Enforcement Division’s Complex Financial Instruments Unit established the fact that organizations cannot neglect the prevailing laws on the context that they serve only non-US citizens.
Although the firm claims to be a foreign entity, it has affected the prices of major securities on the exchange. Moreover, the Commodity Futures Trading Commission arrived at a suitable conclusion with both the parties involved in criminal practices.