Kraken Faces SEC Charges for Unlawful Crypto Trading Operations
The U.S. Securities and Exchange Commission (SEC) has added Kraken – a San-Francisco-based crypto exchange – to its hitlist of industry giants charged with a litany of securities law violations and internal control failures.
In a lawsuit filed in a San Francisco court on Monday, the regulator claimed Kraken failed to register as a securities exchange, broker, dealer, and clearing agency, despite intertwining all such services for customers on its trading platform.
“Kraken’s alleged failure to register these functions has deprived investors of significant protections, including inspection by the SEC, recordkeeping requirements, and safeguards against conflicts of interest, among others,” wrote the SEC in an accompanying press release.
The SEC’s allegations echo those placed against Coinbase and Binance in June, who were also accused of operating unregistered securities exchange by listing numerous “crypto asset securities” on their platforms.
The agency rebuked Kraken for listing many of the same tokens including ADA, SOL, and MATIC, alongside some unique names including ALOG, MANA, and OMG. It provided full arguments for how such tokens were sold as part of investment contracts on a case-by-case basis.
It also called out Kraken for its poor recordkeeping practices: the company has allegedly commingled funds from its customers with those from its corporate accounts and has paid operational expenses from accounts holding customer money.
For instance, as of December 31, 2021, Kraken’s independent auditor said it held over $33 million of customer funds in corporate accounts.
Like its formerly accused rivals, Kraken has dismissed the SEC’s accusations as having no basis in the law, and criticized the agency for providing “no clear
