Legal Action by US SEC Against Kraken Exchange Termed as Catastrophic

Legal Action by US SEC Against Kraken Exchange Termed as Catastrophic

Operating As an Unregistered Securities Exchange

The United States Securities and Exchange Commission (SEC) accused Kraken of operating its cryptocurrency trading platform as an unregistered securities exchange, broker, dealer, and clearing agency. This allegedly resulted in the exchange unlawfully making hundreds of millions of dollars over the last five years and possibly before that. Regardless of ongoing disputes regarding the classification of cryptocurrency buying and selling as an act of cryptocurrency asset ‘securities’, the SEC continues  to enforce the law based on this ambiguity.

According to the complaint, the SEC alleges that Kraken intertwines the traditional services of an exchange, broker, dealer, and clearing agency without having registered any of those functions with the Commission as required by law.

The SEC stated that by operating as an unregistered entity, Kraken deprived investors of whole lot of protections, including inspection by the SEC, recordkeeping requirements, and safeguards against conflicts of interest.

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‘Commingling Customer Money’

The United States SEC likewise claimed that Kraken had commingled customers’ money and cryptocurrency assets with its own operational funds. The complaint stated that Kraken allegedly paid operational expenses directly from accounts that hold customer cash, a practice identified by the exchange’s auditor as “a whole lot of risk of loss” to its customers.

As a result, Kraken stated disagreement with the charges and intends to fight in court, potentially marking the beginning of a long cryptocurrency lawsuit against the SEC.

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