On Monday, the Securities and Exchange Commission (SEC) took legal action against Kraken, a prominent cryptocurrency trading platform, accusing it of functioning as an unregistered securities exchange. This move is part of the ongoing regulatory efforts targeting cryptocurrency companies perceived by the SEC as unlawfully vending securities without proper registration.
In response to the SEC’s allegations, Kraken issued a blog post expressing disagreement with the regulatory body’s claims and asserting its intention to contest the charges in court. The SEC contends that Kraken, the second-largest cryptocurrency exchange in the United States, engages in the commingling of its own funds and cryptocurrencies with those of its customers, thereby heightening the risk of financial loss for its clientele.
The regulatory complaint outlines that Kraken permitted the trading of crypto asset securities without the necessary SEC registration, functioning as an exchange, broker, dealer, and clearing agency without legal authorization. Kraken countered in its blog post, stating that the SEC’s complaint lacks accusations of fund misuse and rejected the SEC’s assertion that crypto assets should be classified as investment contracts.
Kraken emphatically stated, “This is incorrect as a matter of law, false as a matter of fact, and disastrous as a matter of policy.”
The exchange clarified that the charges would not impact its current offerings or services. Previously, in February, Kraken, operated by Payward Inc., had agreed to discontinue its crypto staking services and pay a $30 million penalty to the SEC to settle earlier charges without admitting or denying the allegations.
The SEC’s legal action, filed in the federal district court in San Francisco, seeks injunctive relief, conduct-based injunctions, disgorgement of ill-gotten gains with interest, and financial penalties.