Despite facing backlash from the digital currency community, the United States Securities and Exchange Commission (SEC) persists in bringing lawsuits against digital currency companies. The latest target is Kraken, one of the leading cryptocurrency exchanges globally.Thank you for reading this post, don't forget to subscribe!
To be specific, the SEC has lodged allegations against a crypto trading firm based in San Francisco, accusing it of violating federal laws by functioning as a “broker, dealer, exchange, and clearing agency” without registering with the regulatory body. Dated November 20th.
What accusations have been made by the SEC?
The lawsuit filed by the SEC alleges that:
“Since 2013, Kraken has been operating an online trading platform enabling customers to trade crypto assets, many of which qualify as investment contracts governed by US securities laws.”
According to the SEC, “Kraken has exposed investors to risks without adhering to or being recognized for complying with requirements outlined in US securities laws (…) created to safeguard investors.” The SEC claims they have collected billions in fees and trading revenue from investors without returning them.”
Moreover, the agency has accused the exchange of misusing “over $33 billion worth of client crypto assets” and “more than $5 billion” of client funds, identified as a “significant risk of harm” to its customers according to its independent auditor’s audit plan.
Response from Kraken
Contrastingly, the crypto exchange hasn’t remained silent regarding these allegations, vowing to “vigorously defend its position in court.” The SEC’s complaint alleges “no fraud, no market manipulation, no hacking or compromised security.” No customer loss, no more” is alleged. Breach of fiduciary duty.”
Elaborating on this, the Kraken team articulated:
“The complaint essentially asserts that Kraken’s business necessitates a special securities license due to the digital assets we support being categorized as ‘investment contracts.’ This is legally incorrect, factually incorrect, and has negative implications on policy.”
Illustration through Ripple’s case
The company stated that the SEC had previously attempted to enforce its standpoint that “digital assets traded on platforms were essentially securities transactions,” citing the case against blockchain company Ripple as an example, asserting that the court “completely rejected it.”
To recollect, the SEC accused Ripple of unlawfully vending XRP tokens, which the agency classified as a security. However, Judge Analisa Torres ruled on July 13, 2023, that the retail sale of XRP did not comprise a securities sale, concluding a legal saga that captured the attention of the broader crypto sector.
Moreover, Ripple’s Chief Legal Officer, Stuart Alderotti, condemned the SEC Chairman, Gary Gensler, for prejudicing the crypto industry and the unsuccessful case against Ripple, which was initiated with “ethically compromised Bill Hinman”, whose 2018 address was pivotal evidence, as reported by Feinbold on November 20.