The great crypto meltdown of 2022 wiped out many of the large retail digital asset lenders, including Celsius, Voyager, and BlockFi. These firms promoted themselves as pseudo-banks operating without traditional licenses. It was a fiasco that cost investors billions. Silicon Valley investment platform Abra, which managed over $1 billion in assets at its peak, survived and is now effectively relaunching itself as an institutionally-focused investment firm.
Last summer it closed its U.S. retail business when regulators started scrutinizing the interest-bearing accounts of crypto companies, contending that they were nothing more than unregistered securities offerings. Through Abra Boost and Abra Earn programs, the firm had been advertising rates as high as 10% for investors willing to park their crypto with it. In June 2023, the Texas State Securities Board alleged that Abra and its CEO Bill Barhydt had committed securities fraud and made statements that were “materially misleading or otherwise likely to deceive the public.” At least four other states—Oregon, South Carolina, Iowa and New Mexico—issued cease and desist letters to Abra alleging that Abra Boost and Abra Earn violated securities regulations.
Abra settled those claims earlier this year, and Forbes has confirmed that investors have been getting their money back, according to officials overseeing withdrawals in those states, though deadlines to comply with some of the settlements are yet to follow.
Abra’s revamped platform is now targeting private clients, family offices, hedge funds and other institutional investors. In February, the Securities and Exchange Commission approved its subsidiary Abra Capital Management to operate as a registered investment advisor (RIA). The firm has close to $450 million in assets across spot and options OTC trading, borrowing, lending, staking, yield and asset management services, according to CEO Bill Barhydt.
Abra is also now using the separately managed accounts model (SMA) that allows clients to retain ownership over their assets and independently verify them on-chain. “We have significantly improved the way you can access the same products as before, without taking those third party or counterparty risks that were inherent in the lending system,” says Barhydt.
And while most institutional and high net-worth investors may prefer investing in crypto stocks like Coinbase or MicroStrategyMSTR
or spot bitcoin exchange-traded funds issued by the likes of BlackRockBLK
and Fidelity, Barhydt is confident in Abra’s competitive edge. “The majority of our clients, including the people we gave money back to, want to be able to earn a reasonable yield on their bitcoin and ether. They want to be able to borrow against their assets, and we figured out how to do it in a very simple, ethical and compliant way,” says Barhydt, who studied computer science at Stanford, and worked for NASA and the CIA before delving into venture capital and fintech. He founded Abra in 2016.
Unlike ETFs, SMAs provide investors and their advisors with greater ability to optimize the specific tax consequences of their investment actions. Abra is not alone in embracing SMAs, which are commonly used by traditional wealth management firms. Just last month, Eaglebrook Advisors, a Maryland-based RIA SMA platform with $225 million in assets under management, announced the launch of two digital asset separately managed account strategies with Franklin Templeton. Their custodian of choice, federally chartered crypto bank Anchorage Digital, launched its own SMA offering last November.
The largest crypto exchange in the U.S., Coinbase, also offers a variety of passive and active digital asset strategies offered by index providers and asset managers including CoinDesk Indices, Forteus Investment Management, Hilbert Capital, Hyperion Decimus and MarketVector Indices through its SMA platform.
Still, Barhydt says he’s been successful in bringing back old customers and quietly signing up new clients. About 200 institutions and 200,000 retail clients outside the U.S. are using the platform today, he says.
The minimum investment for a separately managed account with Abra is $100,000, and the average investor is paying an advisory fee between 1 and 2% depending upon the types of investment products they are using (actively managed yield accounts are more expensive) in addition to transaction fees from crypto trading.
Says Barhydt, “I believe we have an advantage now that we have been around the longest and managed to survive, and now we’re back and stronger than ever.”
