The U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against cryptocurrency exchange Kraken, alleging that it violated registration provisions by unlawfully operating as a securities exchange, broker, dealer, and clearing agency.
The complaint, filed in San Francisco federal court, claims Kraken facilitated crypto trading without SEC registration since 2018.
Kraken, a crypto trading platform, is accused of commingling up to $33 billion of customer assets with its own. The SEC contends this jeopardized clients’ funds, citing Kraken’s “deficient” internal controls and questionable business practices. The complaint further alleges Kraken paid operational expenses directly from customer asset accounts.
Kraken disputes the SEC’s claims, stating it never listed unregistered securities and expressing disagreement with the SEC’s regulatory approach. The exchange vows to vigorously defend itself in court. The SEC seeks penalties, injunctive relief, and the return of Kraken’s “ill-gotten gains.”
This legal action aligns with the SEC’s broader initiative, led by Gary Gensler, to regulate cryptocurrencies as securities contracts under U.S. law. In a similar move against Coinbase and Binance, the SEC lists 16 cryptocurrencies, including Cardano and Solana, as securities.
Kraken’s legal troubles aren’t new; it settled charges in February, agreeing to a $30 million settlement and discontinuing crypto-staking services for U.S. customers. This recent SEC lawsuit represents a continuation of regulatory scrutiny on Kraken.