The United States Securities and Exchange Commission (SEC) has filed a complaint against Kraken, accusing the cryptocurrency platform of being an unlisted exchange, broker, dealer, and clearing agency. The SEC alleges that Kraken has unlawfully enabled cryptocurrency transactions since 2018.
Kraken, in response, expressed disagreement with the SEC’s claims, asserting its intention to defend itself in court. The lawsuit, part of the SEC’s broader initiative under Gary Gensler to regulate the crypto industry, contends that crypto assets fall under U.S. securities laws.
Furthermore, the SEC accuses Kraken of commingling customer funds, claiming the exchange combined up to $33 billion in customer assets with its own. The regulator contends that Kraken’s business practices and internal controls were “deficient,” posing a “significant risk of loss” for clients. The SEC alleges that Exchange used customer assets to cover operational expenses.
Gurbir Grewal, director of the SEC enforcement division, stated, “We allege that Exchange made a business decision to reap hundreds of millions of dollars from investors rather than coming into compliance with the securities laws.”
However, Kraken denies the assertions made by the SEC and insists that it never allowed any of these securities on its platform. At this point, the spokesman said that this regulation, through litigation, was hurting the consumer and reducing inventiveness.
SEC Targets Kraken Over Alleged Regulatory Violations
In its blog post, Responding to the commingling allegations, Kraken stated, “We used already earned fees,” and emphasized that the SEC merely alleged there were no missing users’ funds.
Furthermore, the SEC’s complaint accuses Kraken of acquiring ill-gotten gains and seeks penalties and an injunction to compel the company to return them. Big cryptocurrency companies Coinbase and Binance faced similar lawsuits filed in June.
Moreover, On February 9, Kragen settled $30 million with the SEC, promising not to offer staking products and services for the US market indefinitely. Regulatory authorities are currently under scrutiny in relation to their enforcement of securities laws, thereby increasing the pressure of the ongoing lawsuit upon cryptocurrency firms.
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