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SEC Files Fresh Charges Against Crypto Exchange Kraken

The US Securities and Exchange Commission (SEC) has, in a Monday, November 20 press release, confirmed fresh charges against crypto exchange Kraken. The lawsuit comes nine months after Kraken settled previous charges with a $30 million penalty.

The US securities regulator revealed in the Monday announcement that it sued crypto exchange Kraken, alleging the involvement of the parent companies in running unregistered brokerage, dealer, clearing, and exchange services.

Kraken Violated Registration Provisions in Securities Exchange Act 1934 

The press release by the Gary Gensler-led securities watchdog accuses the Kraken’s parent companies of violating the federal securities laws. In particular, the regulator echoed charges leveled against rival crypto exchange Coinbase in mid-2023. It alleges the companies run Kraken’s crypto trading platform without due registration as a securities exchange, broker, and clearing agency. 

The complaint filed by the SEC indicates that since September 2018, Kraken has unlawfully earned hundreds of millions of dollars by facilitating the purchase and sale of crypto asset securities. The Commission submitted that Kraken intertwines the conventional brokerage, dealer, exchange, and clearing agency without the necessary registration of the functions as required by federal law.


SEC complaint indicates that Kraken offers a marketplace assembling orders for securities from multiple buyers and sellers. It deploys non-discretionary methods to ensure the orders interact, thus running unregistered exchanges.

SEC Faults Kraken Business Practices as Aggravating Investors’ Susceptibility to Risk

The Gensler-chaired Commission alleged that Kraken engages in practices that influence securities transactions for accounts opened by its customers, thus executing a brokerage role. Also, it runs as a dealer since it acquires and sells securities for the company’s account without seeking the applicable exception. 

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SEC’s complaint revealed that Kraken offers intermediary services in facilitating the settlement of transactions using crypto asset securities. It added that Kraken assumes the securities depository role and thus runs as a clearing agency.

SEC decries that the failure of Kraken to register for the functions deprived the US investors of critical guardrails such as the Commission’s inspection, recordkeeping, and protection against conflicting interests. 

The complaint filed by the SEC before San Francisco’s federal district court accuses Kraken of running deceptive business practices that are deficient in internal controls and proper recordkeeping. The deficiency subjects the customers to aggravated risks.

SEC submission accuses Kraken of commingling customer assets with the company funds, specifically in settling operational expenses directly from accounts holding clients’ cash. The SEC labeled the practice of commingling the clients’ digital assets with the company’s, a practice its auditor flagged as posing a ‘significant risk of loss’ to the customers.

SEC Accuses Kraken of Offering Unregistered Securities Services

SEC’s complaint labels multiple cryptocurrencies offered by Kraken as securities led by Solana (SOL), Cardano (ADA), Filecoin (FIL), Polygon (MATIC), and Flow (FLOW). Other crypto tokens identified as securities in the lawsuit include Algorand (ALGO), Internet Computer (ICP), OMG Network (OMG), Decentraland (MANA), Cosmos (ATOM) and Near (NEAR). 

Gurbir Grewal, who heads the Division of Enforcement, iterated that Kraken established a business to reap million-dollar earnings from investors instead of complying with the securities laws. The business decision contravenes the registration provisions outlined in the Securities Exchange Act 1934. Consequently, the SEC seeks conduct-based injunctions issued by the court alongside disgorging ill-gotten gains, injunctive relief, and penalties.

Grewal tore to the Kraken business decisions as a selective choice to realize unlawful profits, compromising investor protection. He added that Kraken’s choice has become the typical conduct within the cryptocurrency space. The enforcement director was optimistic that holding Kraken accountable would convey a message to other crypto firms to comply with the securities laws.

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Kraken Condemns SEC’s Path to Regulate by Enforcement

Kraken regretted the SEC’s preference for regulating by enforcement, dismissing the allegations that it lists securities. The crypto exchange spokesperson declared that Kraken will vigorously defend its position.

Kraken’s executive accused the SEC of imposing enforcements whose outcome is harming American consumers, stunting innovation, and eroding US competitiveness globally. He added that Congressional action offers the ideal path towards resolving regulatory clarity missing in the United States.

The filing of the charges on Monday indicates Kraken is yet off the SEC’s hook following the previous charges involving staking services. The Commission leveled charges against Kraken for promising yield to clients who locked up cryptos within the exchange. 

Kraken settled the matter by paying a $30 million civil penalty and discontinuing the staking services within the US. The current lawsuit is set to have legal ramifications across the crypto industry, just as the charges leveled against Binance and Coinbase.

Editorial credit: salarko /

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Stephen Causby

Stephen Causby is an experienced crypto journalist who writes for Tokenhell. He is passionate for coverage in crypto news, blockchain, DeFi, and NFT.

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