Federal securities regulators have filed suit against cryptocurrency broker Kraken, accusing the company of allegedly illegally selling unregistered securities, allowing them to allegedly abuse investor assets.
The Securities and Exchange Commission (SEC) has lodged a lawsuit against Kraken, also known as Payward Inc. and Payward Ventures Inc.
According to the SEC, since 2013, Kraken has operated an online trading platform for buying and selling crypto assets without registering with the SEC. This action is said to have created risk for investors while generating billions in fees and trading revenue for Kraken.
The SEC further claims that Kraken's business practices, inadequate internal controls, and deficient recordkeeping present additional risks prohibited for any properly registered securities intermediary.
It alleges that Kraken at times held customer crypto assets valued at over $33 billion but commingled these with its own assets, allegedly creating significant risk of loss to its customers. Furthermore, it accuses Kraken of holding more than $5 billion worth of its customers' cash and allegedly commingling some of this cash with its own.
The case was filed in the United States District Court for the Northern District of California in San Francisco.