Kraken is The Latest Crypto Exchange Hit With SEC Legal Action

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The US Secu­ri­ties and Exchange Com­mis­sion has con­tin­ued with its crack­down on the cryp­to indus­try fol­low­ing a qui­et cou­ple of months. Its lat­est tar­get is the Krak­en cryp­to exchange, which has been sued for fail­ing to register. 

On Nov. 20, the SEC announced in a press release that it had charged Krak­en for oper­at­ing as an unreg­is­tered secu­ri­ties exchange, bro­ker, deal­er, and clear­ing agency. It is the agency’s lat­est enforce­ment action against dig­i­tal asset exchanges. 

Kraken Targeted by SEC

The lat­est law­suit in San Fran­cis­co fed­er­al court is anoth­er move by SEC Chair Gary Gensler to con­trol the asset class that he deems come under fed­er­al secu­ri­ties laws.

The fed­er­al reg­u­la­tor charged Pay­ward Inc. and Pay­ward Ven­tures Inc., togeth­er oper­at­ing as Kraken.

Accord­ing to the SEC’s com­plaint, Krak­en has made hun­dreds of mil­lions of dol­lars unlaw­ful­ly facil­i­tat­ing the buy­ing and sell­ing of “cryp­to asset secu­ri­ties,” since Sep­tem­ber 2018.

It used the same argu­ment it has done with oth­er cryp­to exchanges, claim­ing that they have not reg­is­tered as secu­ri­ties exchanges. How­ev­er, cryp­to assets have yet to be offi­cial­ly and legal­ly clas­si­fied as secu­ri­ties by Con­gress, which con­tin­ues to pro­cras­ti­nate over reg­u­la­tions. It stated: 

“Kraken’s alleged fail­ure to reg­is­ter these func­tions has deprived investors of sig­nif­i­cant pro­tec­tions, includ­ing inspec­tion by the SEC, record­keep­ing require­ments, and safe­guards against con­flicts of inter­est, among others.”

Read more: Krak­en Review 2023: A Review of Its Secu­ri­ty, Fees, and Features

In response, Krak­en said in a state­ment that it plans to “vig­or­ous­ly defend our posi­tion in court.” 

More­over, the com­pa­ny argued that courts have reject­ed a pre­vi­ous attempt by the SEC to clas­si­fy cryp­to assets as securities.

“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 isn’t the first time the SEC has gone after Krak­en. In Feb­ru­ary, the exchange agreed to halt its stak­ing ser­vices and pay a penal­ty of $30 mil­lion as a set­tle­ment with the regulator.

SEC Warpath Continues 

The reg­u­la­tor also alleges that Kraken’s “busi­ness prac­tices, defi­cient inter­nal con­trols, and poor record­keep­ing prac­tices present a range of risks for its customers.” 

Gur­bir S. Gre­w­al, Direc­tor of the SEC’s Divi­sion of Enforce­ment, said:

“Kraken’s choice of unlaw­ful prof­its over investor pro­tec­tion is one we see far too often in this space, and today we’re both hold­ing Krak­en account­able for its mis­con­duct and send­ing a mes­sage to oth­ers to come into compliance.”

The SEC has also sued Coin­base and Binance this year and is still bat­tling with Rip­ple over sim­i­lar alle­ga­tions. How­ev­er, in July, the judge pre­sid­ing over the Rip­ple case ruled that sec­ondary sales of XRP were not invest­ment con­tracts or securities. 


In adher­ence to the Trust Project guide­lines, BeIn­Cryp­to is com­mit­ted to unbi­ased, trans­par­ent report­ing. This news arti­cle aims to pro­vide accu­rate, time­ly infor­ma­tion. How­ev­er, read­ers are advised to ver­i­fy facts inde­pen­dent­ly and con­sult with a pro­fes­sion­al before mak­ing any deci­sions based on this content.

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