The US Securities and Exchange Commission (SEC) said on November 20 that it has filed charges against cryptocurrency exchange Kraken.
The regulator accused Kraken of operating an unregistered stock exchange, broker, dealer and clearing agency. It alleged that Kraken has raked in hundreds of millions of dollars in revenue since 2018 by illegally facilitating the purchase and sale of securities without registering with the SEC as required by law.
Additionally, the SEC said the company’s inability to register has left customers without protections such as regulatory inspections, safeguards against conflicts of interest and compliance with record-keeping requirements.
In addition, the SEC said Kraken commingled customer and company funds, including by paying operating expenses from accounts containing user funds. Kraken’s own accountant has reportedly identified the company’s practices as posing a “significant risk of loss” to users.
While the content is not identical, the complaint appears similar in scope to the charges the SEC filed against Coinbase and Binance in June. The current complaint is 90 pages long and covers most of Kraken’s stock exchange and trading activities.
The SEC is seeking fines and orders, or restrictions on activities, through its complaint. Kraken and co-founder Jesse Powell have not commented on the case so far.
Kraken has faced government action before
The SEC has filed another complaint against Kraken in the past. In February, the company filed suit over its cryptocurrency betting service. Kraken soon reached a $30 million settlement and agreed to stop offering strikes to US customers.
In addition to these SEC charges, a case between Kraken and the Internal Revenue Service (IRS) was finalized this summer. Kraken was forced to surrender some, but not all, of the customer information previously requested by the IRS. Kraken announced that it would transfer the necessary data to the tax authorities in October.
Kraken processes significant trading volumes every day. Current data from Coingecko shows that the company transacted $808 million in 24 hours on November 20.
