The US Securities and Exchange Commission (SEC) came to the fore with its new move. Cryptocurrency exchange Payward Inc., collectively known as Kraken. and its subsidiary Payward Ventures Inc. initiated legal action against him. Here are the details…
SEC blow to the cryptocurrency exchange
The SEC alleges that Kraken operated as an unregistered securities exchange, broker, dealer and stockbroker and violated the Securities Exchange Act of 1934. The SEC’s complaint, filed under the Securities Exchange Act, accuses Kraken of facilitating the trading of cryptoasset securities without proper registration since September 2018. The regulator alleges that this lack of registration deprives investors of basic protections mandated by law, such as SEC oversight, recordkeeping requirements and safeguards against conflicts of interest.
Kraken’s alleged failure to record these functions is said to expose its customers to serious risks. The SEC alleges that Kraken mixed customer funds with its own funds and mixed customer crypto assets with its own assets, creating potential risks of financial loss for its customers. Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, expressed his concern that Kraken prioritizes profits over investor protection and said, “Kraken’s preference for illegal profits over investor protection is a situation we see all too often in this space.”
Kraken CEO made a statement
In its lawsuit against Kraken, the SEC seeks injunctive relief, conduct-based injunction, restitution of ill-gotten gains plus interest and penalties. Kraken CEO Dave Ripley vehemently denied the SEC’s allegations in a quick response on Twitter. “We strongly disagree with the SEC’s allegations and remain firm in our view that we did not list the securities,” Ripley said. “We plan to defend our position vigorously,” he said. He criticized the SEC’s approach as factually incorrect and inadequate for making policy in the US.
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 @krakenfx should “come in and register” with the agency, when there is no clear path to…
— Dave Ripley (@DavidLRipley) November 21, 2023
The dispute between Kraken and the SEC underscores the challenges surrounding regulatory oversight in the growing crypto space. Backed by the crypto industry’s call for regulatory clarity, Kraken’s stance advocates for congressional action to address the lack of regulatory frameworks in the United States.
Powell: Leave the USA
Kraken co-founder Jesse Powell has expressed frustration with the SEC’s regulatory actions, calling the regulator “the best ‘decel’ in the US” in a recent social media post. Powell claimed that the SEC was unhappy with the $30 million settlement reached in February and warned other crypto companies to leave the “US war zone” to avoid expensive legal battles.
Message is clear: $30m buys you about 10 months before the SEC comes around to extort you again. Lawyers can do a lot with $30m but the SEC knows that a real fight will likely cost $100m+, and valuable time. If you can't afford it, get your crypto company out of the US warzone.
— Jesse Powell (@jespow) November 21, 2023
According to the case file, it is stated that ADA, ALGO, ATOM, FIL, FLOW, ICP, MANA, MATIC, NEAR, OMG and SOL listed by Kraken are specifically considered securities. This legal battle not only underscores the complexity of regulatory oversight in the crypto industry. It also raises fundamental questions about the legal limits and liabilities of crypto platforms operating in the US. The outcome of this case could significantly impact the future regulatory environment for cryptocurrency exchanges in the country.
