SEC Sues Kraken Alleging It’s AnUnregistered Exchange, Mixes User Funds
The United States Securities And Exchange Commission (SEC) has reportedly filed a lawsuit against crypto exchange Kraken, accusing it of commingling customer and corporate funds while operating as an unregistered broker, clearing agency and dealer.
A Kraken spokesperson has denied the allegations and has stated the firm plans to defend itself in court.
Concerning the commingling accusations, the SEC’s court filing states,
“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. 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 Kraken spokesperson said:
“We disagree with the SEC’s complaint against Kraken, stand firm in our view that we do not list securities and plan to vigorously defend our position. It is disappointing to see the SEC continue down its path of regulation by enforcement, which harms American consumers, stunts innovation and damages U.S. competitiveness globally.”
The SEC’s complaint alleges Kraken violated the registration provisions of the Securities Exchange Act of 1934. It wants Kraken to pay penalties and injunctive relief and requests the exchange return its “ill-gotten gains.”
The accusations that Kraken operated as an unregistered broker for crypto assets echo those made in respective lawsuits against Coinbase and Binance in June.
On Feb. 9, Kraken reached a $30 million settlement with the regulator, where it agreed to cease offering crypto staking products and services to U.S. consumers.
Tether Freezes $225M Linked To HumanTrafficking Syndicate Amid DOJ Investigation
Stablecoin issuer Tether has reportedly frozen over $225 million worth of USDT across 37 wallets following an investigation by the U.S. Department of Justice (DOJ) into an international human trafficking syndicate in Southeast Asia.
Notably, this is Tether’s largest-ever freeze of its stablecoin. The crime syndicate is related to the “pig butchering” scam, which the Federal Bureau of Investigation (FBI) said cost U.S. citizens $3.3 billion last year.
Tether stated,
“During a months-long investigative effort by Tether and OKX, U.S. law enforcement agencies, including the DOJ, were proactively alerted to the location of the illicit funds by analyzing the flow of those funds through the blockchain.”
The investigation was ongoing for months and used blockchain analysis tools provided by Chainalysis. It marks the largest-ever freeze of a stablecoin, a press release said.
Paolo Ardoino, CEO of Tether, said,
“Through proactive engagement with global law enforcement agencies and our commitment to transparency, Tether aims to set a new standard for safety within the crypto space.”
Tether also froze 32 crypto addresses linked to terrorism and warfar in Ukraine and Israel last month.
Crypto Exchange BittrexGlobal To Shut Down
Liechtenstein-headquartered crypto exchange Bittrex Global is reportedly planning to wind down operations and has asked all users to withdraw funds from the platform. Notably, the move follows the bankruptcy filing of its U.S. arm earlier this year. The exchange will reportedly suspend trading activity on Dec. 4th.
The company announced,
“It is with great regret that we announce that Bittrex Global has decided to wind down its operations. This decision was not made lightly, and we understand the inconvenience it may have on our valued customers. All users are strongly encouraged to log into their accounts and withdraw assets as soon as possible.”
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