The U.S. Securities and Exchange Commission (SEC) has recently taken action against the cryptocurrency exchange Kraken. The regulatory body has accused Kraken of operating an unregistered securities exchange, broker, dealer, and clearing agency. This accusation highlights the extent to which Kraken has illegally facilitated the purchase and sales of securities without adhering to the necessary registration requirements. The SEC alleges that Kraken’s failure to register has deprived customers of important protections and regulatory safeguards.
Kraken has reportedly generated substantial revenue since 2018, estimated in the hundreds of millions of dollars. However, this revenue has been earned unlawfully due to the company’s non-compliance with SEC regulations. By not registering with the SEC, Kraken has failed to provide customers with crucial protections, such as regulatory inspections, safeguards against conflicts of interest, and compliance with recordkeeping requirements. The SEC emphasizes the seriousness of this violation, highlighting how Kraken’s own auditor identified these practices as a “significant risk of loss” for users.
Although the charges against Kraken are not identical to those faced by Coinbase and Binance in June, they share similarities in terms of their scope and nature. The latest complaint spans 90 pages and delves into the various facets of Kraken’s exchange and trading operations. The SEC’s objective in filing this complaint is to seek fines, injunctions, or restrictions on activities.
This is not the first time that Kraken has faced charges from the SEC. In February, the company was charged over its cryptocurrency staking service. Following the charges, Kraken reached a settlement of $30 million and agreed to discontinue offering staking services to U.S. customers. Additionally, Kraken has also had to contend with a legal battle against the Internal Revenue Service (IRS). In the recently concluded case, Kraken was required to surrender some, but not all, customer information that was initially requested by the tax agency. Kraken eventually complied with the IRS’s demands in October.
Kraken’s failure to register with the SEC has led to severe legal consequences. The company has been charged with operating an unregistered securities exchange, broker, dealer, and clearing agency. The SEC’s complaint highlights the monetary gains Kraken has made through illegal practices, lacking the necessary safeguards and compliance measures required by law. As the case unfolds, Kraken’s co-founder Jesse Powell and the company are yet to comment on the allegations brought against them. With significant trading volumes and revenue at stake, the outcome of the charges against Kraken will undoubtedly have ripple effects throughout the cryptocurrency industry.