SEC Accuses Kraken

SEC Accuses Kraken of Functioning as an Unregistered Exchange Broker, Dealer, and Clearing Agency

On Monday, the SEC accuses Kraken, a global cryptocurrency exchange, of functioning as an unregistered securities exchange, broker, dealer, and clearing agency. They are currently facing a lawsuit because of prior registration as the regulatory body

The Securities and Exchange Commission (SEC) has accused Payward Inc. and Payward Ventures Inc., collectively known as Kraken, of unlawfully operating Kraken’s cryptocurrency trading platform as an unregistered securities exchange, broker, dealer, and clearing agency.

Kraken was founded in 2011. It is backed by investors including Blockchain Capital, Digital Currency Group, Hummingbird Ventures, SkyBridge, and Tribe Capital.

SEC Accuses Kraken

According to the SEC’s allegations, dating back to at least September 2018, Kraken has generated substantial revenue by facilitating the trading of crypto asset securities without proper registration for its exchange, broker, dealer, and clearing agency functions.

The SEC contends that Kraken has combined the traditional roles of an exchange, broker, dealer, and clearing agency without complying with the required registration with the Commission.

This failure to register, as per legal requirements, has left investors without crucial protections, such as SEC oversight, recordkeeping obligations, and safeguards against conflicts of interest.

Kraken Functioning as an Exchange

The SEC claims that Kraken, through its platform, has been functioning as an exchange by providing a marketplace for the buying and selling of securities, as a broker by executing securities transactions for customers, as a dealer by buying and selling securities for its account, and as a clearing agency by facilitating the settlement of transactions in crypto asset securities.

The complaint also alleges that Kraken’s business practices, inadequate internal controls, and deficient recordkeeping pose various risks to its customers.

Kraken is accused of commingling customer funds with its own, including using customer cash to cover operational expenses. Additionally, Kraken allegedly commingles customers’ crypto assets with its own, creating a significant risk of loss for customers, as identified by its auditor.


The SEC’s accusations against Kraken for operating as an unregistered exchange, broker, dealer, and clearing agency underline regulatory concerns in the cryptocurrency space, emphasizing the need for investor protection. Kraken’s case reflects a broader regulatory focus on ensuring adherence to securities laws within digital asset trading platforms.

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