Kraken accused by SEC of operating an unregistered platform and improper commingling of client funds.

Kraken Faces Accusations from SEC of Unregistered Platform Operation and Misuse of Client Funds

Author: Nikhilesh De, CoinDesk; Translation: Songxue, LianGuai

  • Kraken has joined Coinbase and Binance, becoming a target of the US Securities and Exchange Commission (SEC), as these companies operate without proper registration as securities firms in the United States.

  • SEC has listed a long list of tokens it considers to be securities for Kraken’s trades, and each token has appeared multiple times in SEC enforcement actions.

The US Securities and Exchange Commission (SEC) claimed in a new lawsuit on Monday that the cryptocurrency exchange, Kraken, commingled customer and corporate funds while operating as an unregistered broker-dealer, clearing agency, and exchange.

The federal regulatory agency alleges that the San Francisco-based company repeatedly sued other cryptocurrency platforms, violating federal securities laws. The regulator cited the unique aspect of Monday’s lawsuit, which is that Kraken mixed customer cryptocurrencies valued up to $33 billion with its own corporate assets, resulting in “significant risks,” according to Kraken’s independent auditor.

The lawsuit states, “Likewise, Kraken sometimes holds more than $5 billion in customer cash and mixes some customer cash with its own cash.” “In fact, sometimes Kraken pays operating expenses directly from bank accounts holding customer cash.

The SEC alleges that Kraken operates as an unregistered broker-dealer, clearing agency, and exchange, similar to the complaints filed earlier this year against Binance and Coinbase.

These lawsuits are ongoing. The SEC previously reached a settlement regarding similar allegations against the now-defunct US section of Bittrex.

Similar to previous lawsuits, the federal regulatory agency listed some tokens it believes are unregistered securities, including Algorand (ALGO), Polygon’s MATIC, and NEAR. According to the lawsuit, Kraken played a direct role in promoting these tokens to the investing public.

The SEC filing seeks a permanent ban on Kraken operating as an unregistered exchange. The agency also stated that it will impose fines on Kraken and require it to return illegal gains.

Kraken stated in a statement, “We disagree with the SEC’s complaint against Kraken and believe that we do not offer securities and plan to vigorously defend our position.” “The SEC has repeatedly asked cryptocurrency exchanges to enter and register but lacks a single law to support its position and a clear registration process. Despite opposition from legislators, the SEC continues to take legal action against these cryptocurrency exchanges. Over the years, we have advocated for effective US market regulation to address the unique risks and benefits that cryptocurrencies bring to individuals. We believe that congressional action is the most appropriate way to address the issue of unclear US regulation. It is disappointing to see the SEC continue down this path, harming American consumers, impeding innovation, and undermining America’s global competitiveness.”

The exchange also published a blog post outlining its position.
Earlier this year, regulatory agencies addressed allegations related to Kraken’s staking service.

We will continue to update Blocking; if you have any questions or suggestions, please contact us!


Was this article helpful?

93 out of 132 found this helpful

Discover more


The $47 Million KyberSwap Hacker Plots Surprising Proposal in Upcoming Announcement

KyberSwap hacker announces potential deal following $47 million heist last week.


Fade out and rise of an old Defi project

Editor's Note: Original title was "Kyber's Fade Out and Rise" In the DeFi project, the previous a...


Kyberswap was hacked for $48 million, but the drama-loving hackers took the initiative to negotiate.

Hacker left a message on the chain I'll take a break and we'll chat later. Original author Loopy Lu. On November 23rd...


KyberSwap Hack: Funds Stolen in Million-Dollar Exchange Adventure!

Major security breach at KyberSwap - $48 million stolen, investors urged to withdraw funds immediately. Hackers hint ...


KyberSwap Breached in $46 Million Hack Thanks to 'Infinite Money Glitch' A Heist for the Modern Age!

Fashionista, take note Doug Colkitt has revealed that the recent KyberSwap hack saw an intricate and well-planned app...


Does the DeFi market have no ceiling? How to introduce quality assets is the key

On July 25th, the "DeFi Feature Series" initiated by a chain community, DeFi Lab, DOS Network, and Hydro st...