Crypto trading platform Abra has announced the acquisition of several private cryptocurrency trusts from Valkyrie Investments. This move comes shortly before Abra settled with 25 U.S. state financial regulators for operating without the necessary licenses, marking a significant development in the crypto industry’s regulatory landscape.
Details of the Acquisition
Abra Capital Management LP, the asset management arm of Abra, took over several active trusts from Valkyrie in May. According to Marissa Kim, head of asset management at Abra, the deal includes Valkyrie’s Tron and Zilliqa trusts, as well as several trusts that have not yet been launched. The Zilliqa Trust had sold a total of $21.3 million in assets as of October last year, while the Tron Trust had sold $50 million in assets as of September 2022, according to filings with the U.S. Securities and Exchange Commission. However, the specific terms of the deal were not disclosed.
“This acquisition will provide ACM with a way to expand its current offering of spot and DeFi products to a new audience of investors,” Kim said. Abra may consider filing to make some of the trusts publicly traded in the future, depending on market demand, she added. Valkyrie did not immediately respond to requests for comment on the sale.
Regulatory Challenges and Settlements
Abra’s acquisition comes at a time when the company is navigating significant regulatory challenges. In June, Abra settled with a working group of regulators over claims that it had operated its business without the required state licenses to handle crypto asset activities. As part of the settlement, Abra is set to return $82.1 million in crypto assets to U.S. customers. This agreement follows Abra’s decision to halt offering services in the country last year. Abra Capital Management is an SEC-registered investment advisor, the firm stated.
Abra faced additional regulatory scrutiny when it was accused of securities fraud by the Texas State Securities Board in June 2023. The regulator alleged that Abra misled investors through the sale of two crypto interest account products and claimed that Abra had been insolvent or nearly insolvent. Texas was among the states involved in the recent settlements.
Valkyrie’s Strategic Moves
Valkyrie Investments has been offloading portions of its business throughout 2024. Earlier this year, Valkyrie sold its primary exchange-traded funds business to CoinShares International Ltd. The company’s private trusts business included funds tied to various cryptocurrencies, such as Algorand, Avalanche, BitTorrent, Dash, Polkadot, and Bitcoin.
Leah Wald, a co-founder and the then-chief executive of Valkyrie, resigned from the company last month, marking another significant change in the company’s structure. These strategic moves by Valkyrie reflect a broader trend in the crypto industry, where companies are adjusting their operations and portfolios in response to market conditions and regulatory pressures.
Future Implications for Abra
The acquisition of Valkyrie’s trusts presents an opportunity for Abra to diversify and enhance its product offerings. By integrating these trusts, Abra can attract a broader range of investors and solidify its position in the competitive crypto trading market. The possibility of making some of these trusts publicly traded could further enhance Abra’s market presence and appeal.
However, the company must navigate its regulatory challenges carefully. The recent settlements and accusations highlight the importance of compliance in the rapidly evolving crypto industry. As Abra moves forward, maintaining robust regulatory adherence will be crucial to its long-term success.
Conclusion
Abra’s acquisition of Valkyrie’s private crypto trusts represents a strategic expansion amid regulatory settlements. This move could significantly enhance Abra’s offerings and attract new investors. However, the company must continue to address its regulatory challenges to ensure sustainable growth. The crypto industry’s evolving regulatory landscape underscores the need for companies like Abra to adapt and comply with legal requirements while pursuing growth opportunities.
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