Key Takeaways
- The U.S. SEC has charged Kraken with operating an unregistered securities exchange, broker, dealer, and clearing agency.
- The lawsuit against Kraken is similar to charges filed by the SEC against crypto exchanges Binance, Bittrex, and Coinbase earlier in the year.
- The lawsuit also alleges Kraken commingled customers’ crypto assets and cash reserves with their own holdings.
- Earlier this year, Kraken paid a $30 million settlement for charges related to its staking-as-a-service offering.
Kraken Under SEC Scrutiny
The U.S. Securities and Exchange Commission (SEC) has taken legal action against Kraken for alleged violations related to operating an unregistered securities exchange and mixing customer funds with the company’s own.
Regulatory Stance
The SEC views many cryptocurrency tokens as securities, requiring crypto exchanges that offer these tokens for sale to register accordingly. This approach is consistent with previous actions taken against Binance, Bittrex, and Coinbase.
Lawsuit Details
Filed in a U.S. district court in California, the lawsuit specifies cryptocurrencies like Cardano (ADA), Cosmos (ATOM), Dash (DASH), Filecoin (FIL), Internet Computer (ICP), Polygon (MATIC), and Solana (SOL) as securities allegedly offered by Kraken without proper registration.
Enforcement Actions
This recent lawsuit marks the second enforcement action Kraken has faced in 2021, following a previous $30 million settlement related to their staking-as-a-service offering earlier this year.
Allegations of Fund Commingling
One of the key allegations in the SEC’s complaint against Kraken is the mixing of customer funds with the company’s own assets, presenting a significant risk to customers.
Regulatory Concerns
The SEC stated that Kraken had commingled customer crypto assets valued at over $33 billion with its own holdings, potentially jeopardizing customer funds. Additionally, the regulator highlighted instances where operational expenses were paid directly from accounts containing customer cash.
Company Response
Kraken has refuted the SEC’s claims, arguing that the agency’s stance on registration lacks legal support. In a blog post, Kraken emphasized the complexity of securities law compliance for digital asset trading platforms.