Key Insights
- Kraken dismisses “incorrect” SEC lawsuit over unregistered crypto trading.
- Exchange says customer assets not at risk despite SEC allegations.
- Latest regulatory clash comes amid Justice Department targeting rivals like Binance.
SAN FRANCISCO – Cryptocurrency exchange Kraken is hitting back against a lawsuit filed this week by the Securities and Exchange Commission (SEC) accusing its parent companies of operating an unregistered online trading platform for digital asset securities.
In a post on X, San Francisco-based Kraken called the regulator’s complaint “incorrect as a matter of law” while stating that its crypto trading operations remain fully functional and unaffected despite the litigation.
The SEC alleges that Kraken has at times held over $33 billion in customer crypto assets and over $5 billion in customer cash while commingling some funds with its own, creating “a significant risk of loss” for account holders. Kraken counters that no customer assets are actually missing or at risk, and that the SEC cannot point to any specific losses that have occurred.
This marks the latest clash between the SEC and cryptocurrency firms amidst a broader crackdown on the digital asset industry. Federal regulators have repeatedly argued that crypto exchanges should register with the SEC akin to traditional securities brokerages. However, Kraken asserts there are no clear registration rules tailored to cryptocurrency trading platforms.
Read also! Kraken to Share Data on 42,000 Users with IRS After Court Order
In February 2022, Kraken’s parent companies Payward and Payward Ventures previously settled separate SEC charges over an unregistered “staking-as-a-service” program for $30 million. Some view this week’s lawsuit as the regulator making another attempt to rein in the nonconforming crypto exchange.
Other industry players like Coinbase blasted the fresh legal action against Kraken as unjustified. Meanwhile, the U.S. Justice Department is pursuing a nearly $4 billion penalty against rival exchange Binance over alleged criminal violations underpinning its operations.
With defiant crypto firms unwilling to bend the knee caps, more serious battles between digital asset powerhouses and Washington may lie ahead. Kraken at least for now seems ready to dig in for a protracted fight in defense of its business.