US SEC Sues Kraken Exchange, CEO Jesse Powell Calls SEC “USA’s Top Decel”
Cryptocurrency exchange Kraken is the latest target of the U.S. Securities and Exchange Commission (SEC), joining the ranks of Coinbase and Binance in facing accusations of operating without proper registration as securities businesses in the United States. This article delves into the SEC’s claims against Kraken, focusing on allegations of operating as an unregistered platform and improperly commingling customer funds.
SEC Allegations Against Kraken
The SEC has accused Kraken of violating federal securities laws by operating as an unregistered broker, clearing agency, and dealer. This echoes similar suits against other crypto trading platforms.
A distinctive aspect of the lawsuit is the claim that Kraken created a “significant risk” by commingling up to $33 billion in customer cryptocurrency with its own corporate assets. The SEC emphasizes Kraken’s alleged practice of holding over $5 billion worth of customer cash, at times using it for operational expenses, thus commingling it with the exchange’s corporate funds.
Kraken’s Response and Disagreement with the SEC
Kraken’s co-founder, Jesse Powell, responded vehemently to the SEC’s allegations, criticizing the regulator as the “USA’s top decel” and accusing it of dissatisfaction with the $30 million settlement Kraken reached in February.
Powell argues that the SEC’s approach is detrimental, warning other crypto companies to consider leaving the “U.S. warzone” to avoid costly legal battles. Kraken, in an official statement, expressed disagreement with the SEC’s complaint, asserting that it does not list securities and plans to vigorously defend its position.
SEC’s Request and Kraken’s Stand
The SEC filing seeks a permanent ban on Kraken from operating as an unregistered exchange, along with a fine and the return of ill-gotten gains. Kraken maintains its stance, asserting that the SEC’s challenges lack legal support and a clear path to registration.
The exchange advocates for effective U.S. market regulation, urging Congressional action to address the unique risks and benefits of the crypto industry. Kraken expresses disappointment in the SEC’s continued regulatory approach, which it believes harms consumers, stifles innovation, and damages U.S. competitiveness globally.
Previous SEC Charges and Settlement
This recent lawsuit follows a prior SEC charge against Kraken for “failing to register the offer and sale of their crypto asset staking-as-a-service program.” In the settlement, Kraken agreed to pay $30 million and cease offering crypto-staking products and services to U.S. customers. Powell’s comments underscore the financial burden of legal battles with the SEC, indicating that the $30 million settlement bought only temporary relief.
As Kraken faces the SEC’s accusations of operating without proper registration and commingling customer funds, the cryptocurrency industry once again grapples with regulatory challenges. The exchange’s strong response reflects the ongoing tension between crypto companies and regulatory authorities, emphasizing the need for clear and comprehensive regulations to navigate this rapidly evolving landscape. The outcome of this legal battle will likely influence the regulatory environment for cryptocurrency exchanges in the U.S. and beyond.
