The U.S. Securities and Exchange Commission (SEC) on Monday filed charges against cryptocurrency exchange Kraken (Payward Inc. and Payward Ventures Inc.). The commission alleged that the exchange was operating its crypto trading platform as an unregistered securities exchange, broker, dealer, and clearing agency. However, the top financial watchdog listed 16 specific cryptocurrencies traded on Kraken, including Solana, Cardano, and Algorand, which it deems as crypto asset securities.
Is Kraken operating illegally?
According to the complaint filed by the US SEC, Kraken has unlawfully facilitated the trading of crypto asset securities by which it generated hundreds of millions of dollars since September 2018. It mentioned that the crypto exchange contends the roles of an exchange, broker, dealer, and clearing agency but without proper registration, depriving investors of essential protections.
The commission stated that the Kraken made available many “crypto assets securities”. It highlighted that the crypto exchange made crypto assets available for trading that have been the subject of prior SEC enforcement actions based upon their status as crypto asset securities.
This included cryptos like Cardano (ADA), Axie Infinity (AXS), Algorand (ALGO), Cosmos (ATOM), Chiliz (CHZ), COTI, DASH, Filecoin (FIL), FLOW, Internet Computer (ICP), Decentraland (MANA), Polygon (MATIC), NEAR Protocol (NEAR), OMG Network (OMG), The Sandbox (SAND) and Solana (SOL).
It is important to note that the commission hasn’t mentioned Ripple’s XRP and Ethereum (ETH).
Kraken’s Jesse Powell replies
However, the Kraken responded to the charges in a blog post. It expressed disagreement with the SEC’s claims. The company cited a previous case where the SEC’s similar theory was rejected by a US court asserting that the commission’s legal argument was unfounded.
It contested the SEC’s claims of commingling its funds with clients by clarifying that no customer funds are missing, and no losses have occurred. Kraken explained that the so-called “commingling” involves the use of fees the company has already earned.