In a significant development,
the Securities and Exchange Commission (SEC) has charged Payward Inc. and
Payward Ventures Inc., collectively known as Kraken, for operating its crypto
trading platform as an unregistered securities exchange, broker, dealer, and
clearing agency. The SEC alleges that Kraken has unlawfully facilitated the
buying and selling of crypto asset securities, amassing hundreds of millions of
dollars in violation of securities laws.
According to the SEC’s
complaint, Kraken’s unconventional blend of functions—acting as an exchange,
broker, dealer, and clearing agency—has been executed without the required
registration with the Commission. This lack of registration has left investors without
essential protections, including SEC inspection, recordkeeping oversight, and
safeguards against conflicts of interest.
The complaint outlines specific
actions by Kraken, asserting that the platform provides a marketplace for
securities trading, executes transactions for its customers, engages in buying
and selling securities for its own account, and acts as an intermediary in
settling transactions in crypto asset securities. The SEC also raises concerns
about Kraken’s business practices, deficient internal controls, and
questionable recordkeeping, emphasizing potential risks for its customers.
“…incorrect
as a matter of law, false as a matter of fact, and disastrous as a matter of
policy”: Kraken Responds Defiantly
In response to the SEC’s
charges, Kraken released a statement vehemently disputing the allegations. The
company asserts its intention to vigorously defend its position in court,
emphasizing that the SEC’s complaint contains no accusations of fraud, market
manipulation, customer losses due to security breaches, or breaches of
fiduciary duty.
Today, the SEC
filed a complaint alleging that Kraken operates as an unregistered
national securities exchange, broker, and clearing house. We disagree
with their claims and plan to vigorously defend our position. https://t.co/a0C4wzBo3f—
Kraken Exchange (@krakenfx) November
21, 2023
Kraken’s statement underscores
that the SEC’s case hinges on a technical argument, asserting that the platform
requires special securities licenses due to the nature of the digital assets it
supports. Kraken rejects this premise as legally incorrect, factually false,
and detrimental to the broader regulatory landscape.
Legal
Precedent and Congressional Action
Kraken draws attention to a
previous…
