SEC Sues Kraken for Running Unregistered Crypto Exchange

Facts

• The US Securities and Exchange Commission (SEC) has sued Kraken crypto exchange for allegedly operating as a securities exchange without registering with the regulator.¹
• The SEC's lawsuit claims that the San Francisco-based exchange mixed customer and corporate funds to the tune of up to $33B while operating as an unregistered broker, clearing agency, and dealer.²
• The second enforcement action against Kraken — which echoes the SEC's complaints against rival exchanges Binance, Bittrex, and Coinbase — comes after it paid a $30M settlement in February for charges related to its staking-as-a-service offering.³
• The SEC's filing listed several tokens as unregistered securities, which it claims Kraken promoted to the investing public. The agency is seeking to ban Kraken from operating as an unregistered exchange and pursuing a fine to reap Kraken's illicit gains.²
• In its response, Kraken CEO Dave Ripley voiced his disagreement with the lawsuit on X (formerly Twitter) denying the crypto exchange lists securities and adding that the SEC is 'demanding compliance with a regime that doesn't exist.'⁴
• Meanwhile, cryptocurrency prices fell Tuesday, after Binance founder Changpeng Zhao pleaded guilty to criminal charges brought by the US Justice Department and agreed to pay a $50M fine and resign as the firm's CEO.⁵

Sources: ¹Reuters, ²CoinDesk, ³Investopedia, ⁴The Hill and ⁵CNBC.

Narratives

• Establishment-critical narrative, as provided by CryptoSlate. The SEC is overstepping its bounds and launching frivolous lawsuits to crack down on cryptocurrency exchanges. It's trying to prop itself up as the chief crypto regulator by inaccurately labeling crypto tokens and assets as securities. The regulator has no clue about digital assets, and it's acting before Congress has passed any laws on the matter. As no law requires Kraken or any other cryptocurrency exchange to register with the SEC, Kraken will defend itself in every way possible.
• Pro-establishment narrative, as provided by Fortune Crypto. Kraken has been illegally operating as a securities exchange without registering with the SEC and has also engaged in the scandalous commingling of customer and corporate funds. The FTX disaster served as a warning for the entire world, which is why the SEC must protect consumer assets from shady companies rife with conflicts of interest. The SEC has every right to regulate Kraken; it can't allow the exchange to deal freely without oversight.

Predictions