US SEC Takes Aim at Kraken Exchange in Latest Crypto Regulatory Crackdown
/ Explore the latest crypto regulatory developments as the U.S. SEC takes legal action against Kraken, alleging unregistered securities exchange operations.
By CoinsProbe.
Date: 21 Nov 2023, 09:25 AM IST
In a significant move on Monday, the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Kraken, one of the world’s leading cryptocurrency exchanges. The regulatory body alleges that Kraken has been operating as an unregistered securities exchange, a violation that spans over the last five years, according to the complaint filed in San Francisco federal court.
The lawsuit is part of SEC Chair Gary Gensler’s broader initiative to assert regulatory control over the cryptocurrency market. Gensler contends that digital assets, including cryptocurrencies, should be considered investment contracts subject to federal securities laws.
The SEC’s complaint, dated November 20, 2023, accuses Kraken of unlawfully generating hundreds of millions of dollars in its cryptocurrency trading business. The Commission argues that Kraken has blended the traditional roles of an exchange, broker, dealer, and clearing agency without obtaining the required registration from the SEC.
One of the key grievances outlined by the SEC is Kraken’s alleged failure to provide investors with essential protections by operating as an unregistered entity. Investors were purportedly denied oversight by the SEC, along with safeguards against conflicts of interest and mandatory recordkeeping requirements.
The SEC’s complaint also sheds light on Kraken’s handling of customer funds and crypto assets. The regulatory body claims that the exchange commingled customer money with its operational funds, a practice deemed risky for investors. Kraken is accused of directly using accounts holding customer cash to cover operational expenses, a move identified by the exchange’s own auditor as a “significant risk of loss” for customers.
In response to the SEC’s allegations, Kraken issued a statement expressing its disagreement with the charges. The exchange intends to contest the lawsuit in court, signaling the potential commencement of a protracted legal battle between Kraken and the SEC.
As the crypto industry navigates evolving regulatory landscapes, Kraken’s legal clash with the SEC adds another layer of complexity to the ongoing debate surrounding the classification and oversight of digital assets. The outcome of this lawsuit may have far-reaching implications for the broader cryptocurrency market and its participants.