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SEC Sues Kraken: Crypto Exchange Plans to ‘Vigorously Defend’ Its Position in Court

2023.11.21 16:38

The U.S. Securities and Exchange Commission (SEC) has sued cryptocurrency exchange Kraken for the second time this year, alleging that the crypto trading platform operates as an unregistered securities exchange, broker, dealer, and clearing agency. Kraken disagreed with the securities regulator’s claims, insisting: “We do not list securities, and plan to vigorously defend our position.”

SEC Sues Kraken Again

The U.S. Securities and Exchange Commission (SEC) announced Monday that it has charged “Payward Inc. and Payward Ventures Inc., together known as Kraken, with operating Kraken’s crypto trading platform as an unregistered securities exchange, broker, dealer, and clearing agency.” This is the SEC’s second lawsuit against Kraken this year. The first was in February over the crypto exchange’s staking program, which Kraken agreed to pay $30 million to settle.

In its lawsuit filed on Monday, the SEC alleged that since at least September 2018:

Kraken intertwines the traditional services of an exchange, broker, dealer, and clearing agency without having registered any of those functions with the Commission as required by law.

Moreover, the SEC alleged that “Kraken’s business practices, deficient internal controls, and poor recordkeeping practices present a range of risks for its customers.” The securities regulator further claimed that “Kraken commingles its customers’ money with its own, including paying operational expenses directly from accounts that hold customer cash.” In addition, the watchdog has accused Kraken of listing crypto securities.

The SEC is seeking “injunctive relief, conduct-based injunctions, disgorgement of ill-gotten gains plus interest, and penalties.”

Kraken Intends to Fight Back

Following the SEC’s lawsuit announcement, Kraken issued a statement, stating: “We disagree, and intend to vigorously defend our position in court.” The exchange detailed:

The complaint against Kraken alleges no fraud, no market manipulation, no customer losses due to hacking or compromised security, and no breaches of fiduciary duty.

“It includes big dollar amounts but does not allege a single one of those dollars is missing or misused — no Ponzi scheme, no failure to maintain adequate reserves, and no failure to preserve the identity of client funds 1:1. Indeed, none of these things would be true,” the company emphasized.

Kraken CEO Dave Ripley posted on social media platform X: “We strongly disagree with the SEC claims, stand firm in our view that we do not list securities, and plan to vigorously defend our position. As we have seen before, the SEC argues that Kraken should ‘come in and register’ with the agency, when there is no clear path to registration.”

What do you think about the SEC suing Kraken again this year after the crypto exchange paid $30 million to settle the previous lawsuit? Let us know in the comments section below.