United

Northern

<p>The U.S. Securities and Exchange Commission (SEC) has launched a comprehensive lawsuit against Kraken, one of the major players in the cryptocurrency exchange arena.</p>
<p>An extensive 90-page complaint, filed in the United States District Court for the Northern District of California, marks a pivotal moment in the SEC’s ongoing efforts to regulate the crypto sector more stringently.</p>
<h2 id="the-core-of-the-sec-s-allegations">The core of the SEC’s allegations</h2>
<p>At the heart of the <a href="https://crypto.ro/en/news/kraken-faces-sec-lawsuit-for-alleged-regulatory-violations-and-commingling-funds/" rel="noopener noreferrer nofollow">lawsuit is the SEC’s contention that Kraken</a> has been operating as a broker, dealer, exchange, and clearing agency for crypto assets without proper registration, thus violating U.S. securities laws.</p>
<p>The regulator alleges that since at least September 2018, Kraken has unlawfully facilitated the buying and selling of crypto asset securities, amassing hundreds of millions of dollars in the process.</p>
<h2 id="operational-practices-under-scrutiny">Operational practices under scrutiny</h2>
<p>The SEC’s <a href="https://www.sec.gov/news/press-release/2023-237" rel="noopener noreferrer nofollow" target="_blank">complaint</a> highlights major concerns regarding Kraken’s operational practices. It alleges that the exchange has questionable internal controls and has commingled customer assets, valued at over $33 billion, with its own, thereby putting customers at a significant risk of loss.</p>
<h2 id="specific-tokens-in-the-spotlight">Specific tokens in the spotlight</h2>
<p>The SEC’s focus extends to specific coins traded on Kraken, such as <a href="https://crypto.ro/en/cryptocurrencies/cardano" rel="noopener noreferrer nofollow">ADA</a>, AXS, and ALGO, which have previously faced issues with <a href="https://crypto.ro/en/news/bitcoin-rises-amidst-sec-lawsuits-targeting-coinbase-and-binance/" rel="noopener noreferrer nofollow">SEC rules on other platforms</a> like Bittrex, Binance, and Coinbase.</p>
<p>The regulator is concerned that these tokens, referred to as Kraken-Traded Securities, might be perceived as investment contracts, thus further blurring the lines between cryptocurrencies and securities.</p>
<h2 id="kraken-s-counter-arguments-and-market-response">Kraken’s counter-arguments and market response</h2>
<p>In response, Kraken has stated its intention to vigorously defend its position, arguing that Congress, not the SEC, should dictate how <a href="https://crypto.ro/en/education/best-crypto-exchange/" rel="noopener noreferrer nofollow">cryptocurrency exchanges</a> are regulated.</p>
<p>The exchange maintains that the SEC’s approach to digital assets is fundamentally flawed, both legally and factually. Despite the gravity of the lawsuit, the markets have shown relative stability, indicating that such regulatory actions are increasingly anticipated by investors.</p>
<h2 id="broader-implications-and-kraken-s-future-course">Broader implications and Kraken’s future course</h2>
<p>This lawsuit underscores the SEC’s resolve in bringing crypto exchanges into compliance with federal securities laws, a stance further solidified by the recent bankruptcy of Sam Bankman-Fried’s FTX exchange.</p>
<p>The SEC’s submission seeks not only a permanent prohibition on Kraken’s operation as an unregistered exchange but also aims to impose penalties and compel the return of profits deemed unlawfully obtained.</p>
<p>Kraken, having previously committed to stop marketing or selling securities through crypto asset staking services and paying a $30 million civil penalty, remains determined to continue providing services to its clients without interruption.</p>

SEC’s 90-page complaint against Kraken reveals $33 billion in customer asset commingling

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