Tuesday, May 21, 2024
HomeSTOCKSEC Initiates Legal Clash with Kraken Crypto Exchange: Allegations of Unregistered Operations

SEC Initiates Legal Clash with Kraken Crypto Exchange: Allegations of Unregistered Operations

In a significant legal development, the U.S. Securities and Exchange Commission (SEC) has initiated legal action against Kraken, one of the world’s largest cryptocurrency exchanges. The SEC contends that Kraken has been operating illegally as a securities exchange without adhering to the necessary regulatory registrations.

The lawsuit, filed in San Francisco federal court, represents the latest move in SEC Chair Gary Gensler’s ongoing efforts to bring cryptocurrency under the regulatory umbrella. Gensler asserts that digital assets should be treated as investment contracts, subject to federal securities laws.

Kraken, based in San Francisco, is prepared to mount a defense, asserting that the regulation of cryptocurrency exchanges should be determined by Congress. The exchange challenges the SEC’s perspective on digital assets, labeling it “incorrect as a matter of law, false as a matter of fact, and disastrous as a matter of policy.”

Kraken reassures its user base of over 10 million clients that the lawsuit will not impact its services. The exchange’s intention to defend itself aligns with the stance taken by other major cryptocurrency platforms, including Binance and Coinbase, both of which are currently contesting similar SEC lawsuits filed in June.

The SEC accuses Payward Inc and Payward Ventures Inc, the entities operating as Kraken, of knowingly facilitating hundreds of millions of dollars in crypto transactions since 2018. The regulator alleges a disregard for securities laws designed to safeguard investors’ interests.

Among the SEC’s accusations is Kraken’s purported lack of internal controls and deficient record-keeping practices. Notably, the exchange is accused of commingling customer funds with its own and using customer accounts to cover operating costs.

The failure to register, according to SEC enforcement chief Gurbir Grewal, has led to a business model fraught with conflicts of interest, jeopardizing investors’ funds. Grewal states, “Kraken’s choice of unlawful profits over investor protection is one we see far too often in this space.”

In response, Kraken contends that any alleged commingling amounted to no more than spending fees already earned. The SEC’s complaint against Kraken echoes a similar accusation against Binance, alleging the commingling of customer funds, a charge that Binance vehemently denies.

The lawsuit filed on Monday seeks various remedies, including a civil fine, disgorgement of ill-gotten gains, and a cessation of operating as an exchange without proper registration. Kraken, founded in 2011 and backed by notable investors, now faces a legal battle that could significantly impact the trajectory of cryptocurrency regulations in the United States. The case is officially known as SEC v Payward Inc et al, U.S. District Court, Northern District of California, No. 23-06003.

Read all the Latest NewsTrending NewsCricket NewsBollywood News,
India News and Entertainment News here. Follow us on FacebookTwitter, and Instagram

Most Popular

Recent Comments