Kraken’s Crypto Chaos: SEC Slams Unregistered Platform, Funds Fiasco Unveiled

"Kraken Faces SEC Accusations for Unregistered Securities Trading Amidst Growing Crypto Crackdown"

Kraken, one of the leading cryptocurrency exchanges, is facing accusations from the U.S. Securities and Exchange Commission (SEC) for operating without proper registration as a securities business in the United States. The SEC has already targeted other prominent exchanges, such as Coinbase and Binance, with similar allegations. In its lawsuit filed on Monday, the SEC claims that Kraken commingled customer and corporate funds while functioning as an unregistered broker, clearing agency, and dealer. This violation of federal securities laws has been a recurring issue among crypto trading platforms.

The SEC’s lawsuit against Kraken includes a unique claim that the exchange created a “significant risk” by commingling up to $33 billion of customer crypto with its own corporate assets. The regulator cites Kraken’s independent auditor, who raised concerns about this practice. Additionally, the suit alleges that Kraken has held more than $5 billion worth of its customers’ cash at times, and has even used customer funds to pay for operational expenses. These actions violate the SEC’s regulations and put customers at risk.

The SEC’s accusations against Kraken mirror the complaints made against Binance and Coinbase, both of which are facing ongoing lawsuits. The regulator has previously settled similar allegations with Bittrex’s U.S. division, which has since closed. As part of its case, the SEC has identified several tokens traded on Kraken that it deems to be unregistered securities, including Algorand (ALGO), Polygon’s MATIC, and NEAR. The SEC claims that Kraken actively promoted these tokens to the investing public, further exacerbating its violation of securities laws.

In response to the lawsuit, the SEC is seeking a permanent ban on Kraken’s operation as an unregistered exchange. The agency also aims to impose fines on the company and require it to return any ill-gotten gains. This legal action follows the SEC’s previous settlement with Kraken regarding charges related to the exchange’s staking services.

It is worth noting that Kraken has now joined Coinbase and Binance as targets of the SEC’s scrutiny. These regulatory actions reflect the SEC’s ongoing efforts to enforce securities laws in the rapidly evolving cryptocurrency industry. As the case progresses, it will be crucial for Kraken to address the allegations and cooperate with the SEC to ensure compliance with all necessary regulations.

UPDATE (Nov. 20, 2023, 23:05 UTC): The article has been updated to include additional details and relevant links.

Martin Reid

Martin Reid

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