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SEC Files Lawsuit and Accuses Kraken of Commingling
Crypto Enforcement | Nov 21, 2023
Image: Unsplash/Bryan Burgos
The SEC has filed a lawsuit accusing Kraken of operating as an unregistered platform and improperly mixing customer funds with corporate assets.
This move echoes previous actions taken by the SEC against other major exchanges like Coinbase and Binance. Kraken, a prominent crypto exchange, has become the latest target of the U.S. Securities and Exchange Commission (SEC).
SEC Allegations
According to the SEC, Kraken has not only operated as an unregistered broker, clearing agency, and dealer but has also commingled up to $33 billion in customer crypto with its corporate assets. The SEC's lawsuit seeks to permanently ban Kraken from operating as an unregistered exchange and demands a fine along with the return of any ill-gotten gains.
Kraken Stands Firm and Criticizes SEC
Kraken stands firm in its disagreement with the SEC's allegations. The exchange asserts that it does not list securities and plans to vigorously defend its position. Kraken emphasizes the lack of regulatory clarity in the U.S. and criticizes the SEC's approach of "regulation by enforcement," which it believes harms American consumers, stifles innovation, and undermines U.S. competitiveness globally.
See: Kraken’s Strategy for Canadian Market Growth
In its blog post, Kraken outlines its stance, highlighting that the SEC's complaint does not allege fraud, market manipulation, customer losses due to hacking, compromised security, or breaches of fiduciary duty. Kraken argues that the SEC's claim of "commingling" is a misrepresentation, as it merely involves the use of fees already earned by the exchange.
Kraken also points out the legal precedents where courts have rejected the SEC's theory that digital assets traded on platforms are securities transactions. The exchange believes that the current lawsuit will fail for similar reasons. Kraken emphasizes that there is no legal framework for registering as an exchange, broker-dealer, or clearing agency for investment contracts, as demanded by the SEC.
Committed to Accelerating Crypto Adoption
Amidst this legal battle, Kraken remains committed to its mission of accelerating cryptocurrency adoption and ensuring financial freedom and inclusion.
See:
Kraken Agrees to $30 million Settlement with SEC and Stops U.S. Customer Staking Program
Kraken (Payward Inc.) in Advanced Stages of SEC Unregistered Securities Probe
The exchange continues to advocate for practical and effective rules for digital assets and stresses the importance of comprehensive Congressional action to avoid the U.S. falling behind in the global crypto and Web3 advancements.
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