Abra on Wednesday disclosed it was launching its first SEC-registered RIA, designed to cater to accredited investors, moving away from its retail roots.
Abra previously focused on retail customers.
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Posted April 17, 2024 at 9:22 am EST.
From a beleaguered digital assets lender with a heavy retail book to an institutional crypto asset manager catering to hedge funds and venture capitalists, Abra’s reinvention has taken hold.
The company on Wednesday disclosed the launch of its new institutional umbrella, Abra Capital, recently recognized by the U.S. Securities and Exchange Commission as a registered investment advisor (RIA). The development comes on the heels of a rocky period for Abra, which faced up to five state investigations, several claiming its yield products hawked to retail investors constituted unregistered securities and at least one accusing Abra and its CEO Bill Barhydt of securities fraud.
Customer funds were frozen as investigations played out. As the company reached settlements with states including Texas and Oregon, Abra said last July it would “focus our retail efforts outside the USA for the time being.”
Following the phase-out of its US retail business lines, the company revamped its US presence to focus exclusively on institutional clients. Abra has maintained a retail presence internationally.
CEO Barhydt told Unchained that Abra in recent weeks has been reaching out to existing high net worth clients in an effort to win their business for the new venture. Though some were stung by asset freezes driven by state regulators, Barhydt said the biggest problem with old models was that “you’re taking counterparty risk to the company.”
Because Abra’s new offering largely consists of separately managed accounts (SMAs), clients retain ownership of their assets — even if Abra were to go under. The team is also going after family offices and trusts.
“The whole goal of launching Abra Capital Management under the SMA model was to be able to go back to those high net worth clients and say, ‘Hey, we’re back, we’ve got a model that allows you to earn yield again,’” he said. “And you can do it in a way that completely protects the assets so far that you retain title to the assets, and if Abra goes away, they’re still your assets.”
Abra Capital, headquartered in San Francisco, registered with the SEC in January, reporting $102.5 million of gross assets split between discretionary and non-discretionary strategies run via SMAs. Regulatory filings also indicate that Abra Capital plans to raise capital for hedge funds. The entity does not employ leverage.
With the additions of Abra Prime and Abra Private, the firm is looking to spin up an all-in-one platform for big-money limited partners and institutional traders alike. It’s designed to encompass a prime brokerage model for traders, including a spot and options over the counter (OTC) desk, as well as borrowing and lending, plus staking and yield products.
Demand for BTC, ETH Yield Building
Filings outline a number of strategies for Abra Capital, including staking, lending, and providing liquidity to DAPPs.
The asset management unit’s SMAs are designed with liquidity in mind — including borrowing against them while assets are trading. There are some caveats, though, such as Abra’s lack of SMA support for participating in protocol governance votes.
Marissa Kim, Abra’s head of asset management, said in a statement that there has been “significant demand for a trustworthy and safe platform to earn yield on Bitcoin, Ethereum and other crypto assets and borrow against crypto holdings.”
Moving on from US retail clients is one of a number of business lines that Abra, more than a decade old, has discarded. The firm bet big on becoming the first US-registered crypto bank in 2022.
Read more: Crypto Lender Abra Has Been Insolvent Since March, Says State Regulator
The fallout in crypto markets in the fourth quarter of 2022 appeared to pause those bold bank plans, which never resurfaced. Around the same time, Abra in a period of uncertainty began beefing up its institutional offerings, including OTC trading capabilities, plus structured crypto products.
But Abra, in a sense, has now built a crypto bank without building a crypto bank. Many of the same services, including lending and borrowing, are on the table. The main difference is that no retail investors are in play.
“Obviously an investment adviser is not a bank,” Barhydt said. “But our original goal in wanting to be a bank was to be able to offer these services, and it turns out that as we dug in…it didn’t immediately accomplish what we wanted the way we thought it did. And this structure very cleanly accomplished what we want, which is to make [available] yield, staking, lending, and the ability to invest in bitcoin and ethereum and solana and other crypto assets.”
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