SEC Charges Kraken for Operating as an Unregistered Securities Exchange, Broker, Dealer, and Clearing Agency
On November 20, 2023, Kraken was formally charged for allegedly operating its cryptocurrency trading platform, which earned hundreds of millions of dollars, without proper registration by the SEC.
Allegations of Unregistered Operations
The SEC lawsuit accuses Kraken of failing to register as an exchange, broker, dealer, and clearing agency, resulting in the deprivation of critical investor protections such as SEC inspections and recordkeeping requirements.
Specific Charges Against Kraken
The SEC lists several alleged unlawful operations, including serving as an exchange, broker, dealer, and clearing agency.
Concerns Over Business Practices and Internal Controls
The SEC expressed concerns about Kraken’s business practices, recordkeeping, and commingling of customer funds with its own.
SEC’s Enforcement Director’s Statement
Gurbir S. Grewal criticized Kraken’s prioritization of profits over investor protection. The SEC has committed to holding Kraken accountable and intends to send a message to other entities to comply with securities laws.
Previous Settlement and Ongoing Litigation
In February 2023, Kraken agreed to cease offering securities and pay a civil penalty. The SEC is seeking injunctive relief, conduct-based injunctions, disgorgement of ill-gotten gains, and penalties in the current litigation.
Kraken’s Response to SEC Allegations: Upholding Compliance and Client Services
Kraken has expressed strong disagreement with the SEC’s charges. The company defends its compliance with international regulations and emphasizes its commitment to its mission of promoting cryptocurrency adoption.
Hot Take: Kraken’s Disagreement with the SEC
Kraken’s strong disagreement with the SEC’s claims demonstrates the company’s commitment to vigorously defending its position in court. Despite the allegations, Kraken emphasizes its commitment to clients, the cryptocurrency community, and upholding transparency and reliability in its operations. Kraken maintains a steadfast stance on its compliance with international security and trading regulations.
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