The Securities and Exchange Commission (SEC) has filed a complaint against the cryptocurrency exchange Kraken, alleging that the company has been operating without proper registration as a national securities exchange, broker, and clearing house. Kraken has strongly denied these allegations and is prepared to challenge them.
Kraken’s multi-million dollar controversy
The SEC alleges that Kraken’s operations have resulted in the unlawful sale of crypto tokens, which the commission considers as securities, generating hundreds of millions of dollars. The SEC claims that this activity has deprived investors of necessary protections. The commission also criticizes Kraken for deficient business practices, such as poor internal controls and record-keeping, which expose its users to various risks.
Former Kraken CEO responds to SEC allegations
In response to the SEC’s charges, Jesse Powell, Kraken’s former CEO, expressed his discontent, describing the actions as an attack on innovation. He referred to the SEC as America’s “top decel,” meaning a technology pessimist, and cautioned smaller U.S. crypto firms about the potential risks of staying in the country under the SEC’s scrutiny.
This is not the first time Kraken has faced scrutiny from the SEC. The company previously settled for $30 million in a case involving unregistered securities offered through its crypto lending and staking programs. Despite past issues, Kraken maintains that the SEC has not provided a clear path for registration, leading to regulatory ambiguity.
In its response to the SEC’s complaint, Kraken emphasizes the need for legislative clarity and criticizes the SEC’s enforcement-based regulation, arguing that it hinders consumers, stifles innovation, and weakens U.S. global competitiveness. Kraken urges Congress to provide the necessary regulatory framework to guide the crypto industry.
