The Securities and Exchange Commission (SEC) has filed a lawsuit against another top crypto exchange, Kraken, for not registering as a securities trading platform.
In the suit filed on Monday, the SEC said it’s seeking a judgment to permanently forbid Kraken from violating securities laws and ordering the exchange to give up gains from running an unregistered trading platform.
The agency also wants to stop the exchange from acting as an unregistered exchange, broker, dealer or clearing agency.
“Without registering with the SEC in any capacity, Kraken has simultaneously acted as a broker, dealer, exchange and clearing agency with respect to these crypto asset securities,” the SEC wrote in a court filing in the U.S. District Court for the Northern District of California.
“In doing so, Kraken has created risk for investors and taken in billions of dollars in fees and trading revenue from investors without adhering to or even recognizing the requirements of the U.S. securities laws that are designed to protect investors,” the filing further stated.
The SEC under current chair Gary Gensler has maintained that cryptocurrencies are securities, hence crypto exchanges must be registered with the agency as securities exchanges or face the law. Apparently, crypto exchanges haven’t accepted this and continue to operate, hence the legal actions against them.
Kraken’s “Prohibited” Practices
Among the reasons for suing Kraken are its operational practices, one of which is commingling of user assets. The SEC further alleged that Kraken’s business practices, internal controls and record keeping presented investors additional risks “that would also be prohibited for any properly registered securities intermediary.”
“Kraken has at times held customer crypto assets valued at more than $33 billion, but it has commingled these crypto assets with its own, creating what its independent auditor had identified in its audit plan as “a significant risk of loss” to its customers,” the agency said
“Similarly, Kraken has held at times more than $5 billion worth of its customers’ cash, and it also commingles some of its customers’ cash with some of its own,” the SEC also said, alleging the exchange at times paid operational expenses directly from bank accounts that held customer cash.
“In failing to prevent known conflicts of interest and commingling its investors’ assets with its own, Kraken demonstrates why registration and the investor protections that come with regulatory oversight are critical to the soundness of the United States capital markets,” the SEC added.
Kraken Joins Line of Sued Exchanges
The SEC embarked on a crackdown on crypto earlier this year, leading to the lawsuit against crypto exchanges Coinbase, Bittrex, and Binance. Kraken is now the latest exchange to be charged to court by the SEC.
While Bittrex has settled the SEC by paying a fine, Coinbase and Binance are still in court. However, in a recent development, the U.S Department of Justice (DOJ) has asked Binance to settle the suit with a $4 billion fine.
Kraken’s suit isn’t much of a surprise, as the SEC said it was going after more crypto companies as soon as it had less to handle on its plate. With Binance almost out of the way, it is logical that the agency is coming after Kraken, and may do same for more crypto companies in the near future.
The post SEC Sues Kraken for Running Unregistered Trading Platform first appeared on CryptocyNews.com.
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