The U.S. Securities and Exchange Commission (SEC) fired a fresh salvo in its cryptocurrency crackdown on Monday when it sued Kraken for operating an unregistered securities exchange and allegedly mixing customer funds with its own.
The regulator has long held the view that most cryptocurrency tokens are securities and crypto exchanges offering sale of those tokens need to register as such.The latest suit against Kraken is not much different from the ones the SEC filed against rival exchanges Binance, Bittrex and Coinbase (COIN) earlier in the year.
Filed before a U.S. district court in California, the lawsuit against Kraken names specific cryptocurrencies the SEC considers securities and alleges Kraken is running an unregistered securities exchange by offering them for sale.
These tokens include Cardano (ADA), Cosmos (ATOM), Dash (DASH), Filecoin (FIL), Internet Computer (ICP), Polygon (MATIC), and Solana (SOL), among others.
This is the second enforcement action Kraken has faced this year, as the crypto exchange previously paid a $30 million settlement for charges related to their staking-as-a-service offering back in February.
Comingling or mixing customer funds with its own is another allegation Kraken faces in the SEC's complaint.
«For example, Kraken has at times held customer crypto assets valued at more than $33 billion, but it has commingled these crypto assets with its own, creating what its independent auditor had identified in its audit plan as 'a significant risk of loss' to its customers,» the filing said.
The regulator also alleges Kraken has on occasion «paid operational expenses directly from bank accounts that hold customer cash.» The company's business practices, internal controls, and recordkeepingRead more on investopedia.com