SEC Files Lawsuit Against Kraken
Date: 2023-11-23 Author: Dima Zakharov Categories: IN WORLD
Allegations and Legal Action
The SEC has filed a lawsuit against Kraken, alleging that the platform operated unlawfully by facilitating cryptocurrency transactions without proper registration with the SEC. The complaint, filed in a federal court in San Francisco, claims that since 2018, Kraken functioned as a platform aiding the illegal buying and selling of cryptocurrencies. A Kraken representative countered this, expressing disagreement with the SEC's complaint and intending to defend the platform in court.
Unregistered Exchange Claims
Kraken faces allegations of operating as an unregistered exchange while simultaneously functioning as a broker, dealer, exchange, and clearing agency for these crypto securities without registering with the SEC in any capacity.
Fund Mixing and Regulatory Concerns
The SEC further alleges that Kraken’s business practices and insufficient internal controls resulted in the commingling of client assets, amounting to as much as $33 billion with the platform’s own funds. This, according to the SEC, posed significant risks of loss for Kraken’s clients. The complaint asserted that Kraken covered operating expenses directly from accounts holding client assets, citing an independent auditor of the exchange.
Kraken’s Response and Defense
Kraken rebutted the SEC's accusations, stating that it never listed unregistered securities and lamenting the SEC's regulatory approach, which it believes harms American consumers, hinders innovation, and undermines U.S. competitiveness globally. In a blog post, the exchange labeled the SEC’s combined allegations as nothing more than the commission's attempt to spend Kraken's earned funds, asserting that the regulator did not claim any user funds went missing. The SEC’s complaint listed 16 cryptocurrencies, including Cardano, as deemed securities.
Regulatory Compliance and Future Plans
The SEC’s complaint alleges Kraken's violation of the Securities Exchange Act of 1934 registration provisions. The Commission demands fines from Kraken and seeks the return of unlawfully gained profits. These accusations align with similar claims made against Binance for allegedly operating as an unregistered crypto broker.
Meanwhile, Kraken plans to venture into stock trading on the market.
