Greg Kilminster
Head of Product - Content
SEC charges crypto firm Abra over unregistered offerings
The US Securities and Exchange Commission (SEC) has brought settled charges against Plutus Lending LLC, known as Abra, over the unregistered sale of its crypto lending product, Abra Earn. The regulator also accused the firm of operating as an unregistered investment company.
The SEC’s complaint asserts that, beginning in July 2020, Abra marketed Abra Earn to US investors, promising variable interest on their crypto assets. The programme reportedly accumulated assets of $600 million at its peak, nearly $500 million of which came from US investors. Abra allegedly used these assets to generate income for itself and to pay interest, while marketing the product as a straightforward way for investors to earn interest on their holdings.
The SEC contends that Abra Earn was sold as a security and should have been registered, with no applicable exemptions. Abra also allegedly functioned as an unregistered investment company for over two years, holding more than 40% of its assets in investment securities, primarily through loans of crypto assets to institutional borrowers. The firm began winding down the programme in June 2023, instructing US customers to withdraw their assets.
Stacy Bogert, Associate Director of the SEC’s Division of Enforcement, stated that Abra’s actions deprived investors of the protections afforded by registration laws, including access to crucial information. Bogert also highlighted that Abra’s operation as an unregistered investment company exposed investors to additional risks.
Abra has agreed to an injunction preventing further violations and will face civil penalties to be determined by the court. The SEC's charges underscore its ongoing focus on ensuring compliance within the rapidly evolving cryptocurrency sector.
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SEC fines Sound Point Capital $1.8m for compliance failures
The US Securities and Exchange Commission (SEC) has fined investment adviser Sound Point Capital Management LP $1.8 million for failing to implement adequate safeguards against the misuse of material nonpublic information (MNPI) in its trading activities. The firm managed and traded collateralised loan obligations (CLOs), including those managed by third parties, and was involved in lender groups and creditors' committees, which occasionally exposed it to MNPI.
According to the SEC, Sound Point did not have written policies or procedures in place to manage the risks associated with this sensitive information until several years after it began trading CLOs. Although the firm initiated pre-trade compliance reviews following a 2019 incident, formal written policies for its own CLOs were only adopted in July 2022, and for third-party managed CLOs, not until June 2024.
Andrew Dean, Co-Chief of the SEC’s Enforcement Division’s Asset Management Unit, stressed the importance of fund managers with diverse business operations in ensuring robust policies are in place to prevent the misuse of MNPI. He emphasised that advisers must consider how their roles, particularly as lenders, might expose them to MNPI that could affect their trading positions.
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Former director sentenced to 11 years for Ponzi scheme
Tony Iervasi, the former director of Courtenay House, has been sentenced to 11 years in prison by the Supreme Court of New South Wales for his role in orchestrating a Ponzi scheme that defrauded investors of millions. Iervasi will serve a minimum of seven years before being eligible for parole.
The court heard that Iervasi operated the scheme between December 2010 and April 2017, raising approximately $180 million from around 585 investors. Although investors were told their funds would be traded in foreign exchange and futures markets, only 3% of the money was actually invested. Instead, Iervasi used funds from new investors to pay returns to earlier investors, in classic Ponzi fashion.
The judge who presided over the case, described Iervasi’s dishonesty as "egregious," noting that he created the illusion of a legitimate wealth management business to lure victims. The scheme resulted in a net loss of $54 million to investors, with Iervasi personally benefiting to the tune of $12 million. The impact on victims was severe, with many suffering not only financial ruin but also significant personal hardships, including the loss of homes, the breakdown of marriages, and serious health issues.
Iervasi pleaded guilty to four charges of dishonest conduct related to financial products, as well as operating an unlicensed financial services business. His guilty plea and other factors were taken into account in the sentencing, resulting in a reduced sentence.
ASIC Deputy Chair Sarah Court commented on the sentencing, emphasising the regulator's commitment to protecting investors and the serious consequences of fraudulent activities.
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APRA releases 2024 superannuation performance test results
The Australian Prudential Regulation Authority (APRA) has released the 2024 superannuation performance test results. This year’s test evaluated the performance of 57 MySuper products and 590 trustee directed products (TPD). The test aims to ensure greater transparency and accountability for RSE licensees in case of underperformance.
Key takeaways
- MySuper products: All 57 MySuper products have passed the test for the first time. Ant improvement compared to one fail in 2023, five fails in 2022, and 13 fails in the inaugural test in 2021.
- TDP platform and non platform products: All 398 TPD non platform products have passed the test. However, out of the 192 TDP platform products, 37 failed to meet the test benchmarks. These failed trustee directed products were mostly concentrated in products offered by two trustees: 36 from NM Superannuation Proprietary Limited and one from IOOF Investment Management Limited.
APRA commentary
Deputy Chair Margaret Cole expressed her satisfaction with the overall test results but emphasised that APRA’s focus on product performance will remain unchanged. She mentioned that past performance is not a guarantee of future success, and there is still room for improvement in key performance drivers, such as costs and fees, as well as investment returns.
Cole also revealed that APRA plans to publish a comprehensive package of superannuation product performance metrics, data, and insights in late September.
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HKMA finalises revised banking returns
The Hong Kong Monetary Authority (HKMA) has announced the finalisation of the revised banking returns – Capital Adequacy Ratio (CAR Return), Leverage Ratio (LR Return), Liquidity Position (Liquidity Position Return), and Stable Funding Position (Stable Funding Position Return). Minor consequential amendments have also been made their respective completion instructions (CIs).
These revisions are primarily for the implementation of the Banking (Capital) (Amendment) Rules 2023 (BCAR), which are set to take effect on 1 January 2025.
Reporting institutions will be required to submit the CAR Return, LR Return, and Stable Funding Position Return via the STET system, starting from the reporting position as of 31 March 2025, and the Liquidity Position Return starting from the reporting position as of 31 January 2025.
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