The Securities and Exchange Commission (SEC) has sued the crypto exchange Kraken, accusing the platform of illegal cryptocurrency trading and other violations.
Representatives of the SEC have filed a lawsuit in the U.S. District Court for the Northern District of California against the crypto exchange Kraken. The platform is charged with having acted as an unregistered exchange, broker, dealer, and clearing agency since 2018, facilitating the illegal buying and selling of cryptocurrencies.
In addition, the regulator accuses Kraken of inadequate internal controls that led to the mixing of client assets with the exchange’s own assets worth up to $33 billion. The lawsuit alleges, citing an independent auditor, that the exchange directly covered operational expenses with customer asset accounts. According to the SEC, such a business model was full of conflicts of interest and put at risk the funds of Kraken’s investors and clients.
The SEC’s statement also notes trading in unregistered securities, listing 11 cryptocurrencies such as ADA, ALGO, ATOM, FIL, FLOW, ICP, MANA, MATIC, NEAR, OMG, and SOL. Kraken strongly refutes these accusations as there’s no reason to treat the listed assets as securities.
The regulator plans to seek an injunction against the activities of the exchange, demand payment of a fine, and require the return of illegally obtained income. Similar demands appeared in the charges brought by the SEC in related lawsuits against Coinbase and Binance.
Kraken reps rejected all of the regulator’s accusations and announced their intention to “fight for its mission and crypto innovation in the United States.” In addition, the statement points out that the SEC continues down a path of “regulation via enforcement” that harms American consumers, stifles innovation, and damages U.S. global competitiveness.
Jesse Powell, Co-Founder of Kraken, strongly criticized the SEC. He opined that the SEC’s actions are forcing crypto businesses to leave the U.S. to avoid costly legal battles and called the regulator “USA’s top decel.” This term is used in tech circles as an insult to those who slow down progress.
In February 2023, the SEC made claims against Kraken, as a result of which the crypto exchange was forced to pay a $30 million fine and restrict its staking products and services to American clients.
