Survivors of the virtual currency winter plan a comeback targeting high-value investors

The massive crypto meltdown of 2022 wiped out many of the major retail digital asset lenders, including Celsius, Voyager, and BlockFi. These companies advertised themselves as pseudo-banks operating without a traditional license. It was a fiasco that cost investors billions of dollars. Abra, the Silicon Valley investment platform that managed more than $1 billion in assets at its peak, has survived and is now effectively starting over as an investment firm focused on institutional investors.

Last summer, the company shut down its U.S. retail operations after regulators began scrutinizing crypto companies' interest-bearing accounts, claiming they were little more than offerings of unregistered securities. The company was promoting interest rates as high as 10% to investors who wanted to deposit their cryptocurrencies through the Abra Boost and Abra Earn programs. In June 2023, the Texas Securities Commission alleged that Abra and its CEO Bill Berheit committed securities fraud and made statements that were “likely to be materially misleading or otherwise deceive the public.” did. At least four other states, Oregon, South Carolina, Iowa, and New Mexico, have issued cease-and-desist letters to Abra, accusing Abra Boost and Abra Earn of violating securities regulations.

Abra settled these claims earlier this year, forbes Officials overseeing withdrawals in those states say they are seeing investors getting their money back, but compliance deadlines for some settlements are still looming.

Abra's revamped platform is now targeted at individual clients, family offices, hedge funds and other institutional investors. In February, the Securities and Exchange Commission approved subsidiary Abra Capital Management to operate as a registered investment advisor (RIA). CEO Bill Berhite said the company has nearly $450 million in assets across spot and options OTC trading, borrowing, lending, staking, yield and asset management services.

Abra also currently uses a separately managed account model (SMA). This allows clients to retain ownership of their assets and independently verify them on-chain. “It's a vastly improved way to access the same products as before without taking on the third-party or counterparty risks inherent in the lending system,” he says Barhydt.

And most institutional and high-net-worth investors may prefer investing in crypto stocks like Coinbase and MicroStrategy.
MSTR
Or Spot Bitcoin Exchange Traded Investment Trust issued by BlackRock etc.
BLK
And as for Fidelity, Barhydt is confident in Abra's competitiveness. “The majority of our clients, including those we have refunded, want to be able to earn reasonable yields on Bitcoin and Ether. They want to be able to borrow against their assets. And we've figured out a way to do it in a very simple, ethical and compliant way,” said the author, who studied computer science at Stanford University and worked at NASA and the CIA before researching the details. Mr. Barheit said. Venture capital and fintech. In his 2016 he founded Abra.

Unlike ETFs, SMAs offer investors and their advisors greater ability to optimize the specific tax consequences of their investment actions. Abra is not alone in adopting SMA, which is commonly used by traditional asset management companies. Just last month, Eaglebrook Advisors, a Maryland-based RIA SMA platform that manages $225 million in assets, collaborated with Franklin Templeton to launch an account strategy that manages two digital assets separately. announced. Their chosen custodian, federally chartered cryptocurrency bank Anchorage Digital, launched its own SMA service last November.

Coinbase, the largest cryptocurrency exchange in the United States, offers a variety of passive and active digital asset strategies offered through its SMA platform by index providers and asset managers such as CoinDesk Indices, Forteus Investment Management, Hilbert Capital, Hyperion Decimus, and MarketVector Indices. We also offer

Still, Berheit says he's been able to bring back old customers and quietly attract new ones. The platform is currently used by approximately 200 institutions and 200,000 retail customers outside the United States.

Abra's separately managed accounts have a minimum investment of $100,000, and in addition to trading, the average investor pays an advisory fee of 1% to 2% depending on the type of investment product they use (actively managed Yield accounts are more expensive). Fees for cryptocurrency transactions.

“We believe we now have an advantage because we were able to be around and survive the longest, and now we're back and stronger than ever,” Berheit said. Masu.