The US Securities and Exchange Commission (SEC) has filed a new lawsuit against Kraken, accusing it of operating an illegal online trading platform.
The Kraken exchange has become the latest target of the SEC, following the two well-known entities Coinbase and Binance. The reports from the morning of November 21 state that the SEC has recently submitted a sue against Payward and Payward Ventures, Kraken’s two parent companies, alleging that they engaged in disguised online trading and broke federal securities laws.
The SEC confirmed in documents sent to the Northern District Court of California (USA) that this San Francisco-based company has not registered with the SEC in any capacity while acting as a broker, dealer, and trading platform and clearing payments for numerous assets classified as securities by US law.
Therefore, the SEC charged that Kraken had violated authorities and laws supposed to protect investors, exposing the public to the risks and pocketing billions of dollars in trading profits and fees.
Moreover, the lawsuit also focuses on internal controls, report storage, and business operations of Kraken. The SEC added that the exchange combined customer deposits and its own assets. The Securities and Exchange Commission further stated that today’s incident clarifies the significant role of SEC registration and supervisory authority in ensuring the US capital markets.
“Kraken has caused significant losses for its customers due to holding over $33 billion in customer cryptocurrency and combining it with its own assets.“
In a similar manner, Kraken mixed its funds with over $5 billion in cash from regular customers. The platform occasionally pays operating expenses directly from customers’ cash accounts.
Besides, the Federal Regulatory Agency has released a list of tokens that they would like to list as securities, including Algorand (ALGO), Polygon (MATIC), NEAR Protocol (NEAR)… This file insists that Kraken was involved in directly introducing these tokens to the investing public.
Based on those allegations, the SEC intends to ask the court to approve a permanent injunction, requiring the parties involved to abide by securities regulations and demand reimbursement for any money loss. In addition, the committee aims to “abolish” Kraken’s functions as a clearing agency, exchange, broker, and dealer. Previously, Bittrex had to close its 9 years old US branch as a result of similar mistakes.
That morning, Kraken also confirmed the information being sued by the SEC, publicly announced its disagreement, and stated that they would work to disprove the agency’s accusations.
The SEC requested in February that Kraken’s parent companies, Payward Trading and Payward Ventures, pay a $30 million fine and prohibit the exchange’s staking service from operating in the US market.
At that point, Kraken agreed to “disband” the staking feature and pay a civil fine, but it did not admit or deny the SEC’s accusations. Nonetheless, the exchange keeps this service accessible to users outside of the US via its subsidiary.
More updates on Kraken, they have just revealed its intention to develop layer-2 and assist UK police in refunding 2 million USD to scam victims. In addition, the exchange recently appointed a new managing director in the UK.
>>> Kraken acquired the Dutch exchange, expanding the European market
