Overview of the Lawsuit Against Kraken
The U.S. Securities and Exchange Commission (SEC) has charged Kraken with operating an unregistered securities exchange, broker, dealer, and clearing agency. This legal action is part of the SEC’s broader crackdown on cryptocurrency exchanges.
Similarities to Previous Cases
This lawsuit against Kraken mirrors charges brought by the SEC against other major crypto exchanges such as Binance, Bittrex, and Coinbase earlier this year. The SEC alleges that Kraken commingled customers’ crypto assets and cash reserves with its own holdings.
Specific Allegations and Cryptocurrencies Involved
The lawsuit filed in a U.S. district court in California names specific cryptocurrencies, including Cardano (ADA), Cosmos (ATOM), Dash (DASH), Filecoin (FIL), Internet Computer (ICP), Polygon (MATIC), and Solana (SOL), as securities being offered for sale on Kraken’s platform.
Enforcement Actions Against Kraken
This is the second enforcement action Kraken has faced this year. Earlier, the exchange paid a $30 million settlement related to charges concerning its staking-as-a-service offering.
Commingling of Customer Funds
One of the key allegations in the SEC’s complaint is that Kraken commingled customer funds with its own, potentially putting customers’ assets at risk. The SEC claims that Kraken held customer crypto assets valued at over $33 billion but mixed them with its own holdings.
Additionally, the SEC alleges that Kraken used customer cash to pay operational expenses directly from bank accounts, highlighting deficiencies in the company’s business practices and recordkeeping.
Response from Kraken
Kraken has disputed the SEC’s claims, stating that the agency’s position on registration for digital asset trading platforms lacks legal support. The company argues that the SEC’s demands are not backed by existing securities laws.
