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Kraken it open: A look at SEC’s recent moves

2min Read

The SEC pressed charges against Kraken, prompting a response from the CEO maintaining the company’s current position.

Kraken it open: A look at SEC's recent moves

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  • The SEC pursued charges against Kraken.
  • Kraken’s CEO responded to their allegations, holding their stance.

The SEC has been going in on the crypto market since the beginning of the year. What started as a crackdown on Binance [BNB] and Coinbase [COIN], has started to affect other exchanges as well.

Cracking in on Kraken

Kraken is facing charges for not registering as a securities exchange, broker, and more since at least September 2018. The SEC claims Kraken mixed its funds with customers, using their cash to cover expenses. The exchange held over $33 billion in customer crypto assets, risking loss.

The SEC accused Kraken of choosing profits over complying with laws, creating conflicts of interest, and risking investor funds. Gurbir Grewal, SEC’s enforcement director, said that this is too common in the crypto space.

A swift response

Kraken’s CEO, Dave Ripley, countered SEC criticisms in a tweet, strongly disagreeing and affirming the firm’s stance against listing securities. The plan is to vigorously defend this position.

The SEC pushed for Kraken to register, but there was no clear path. Kraken saw these claims as incorrect, unlawful, and inappropriate. As a leading entity, Kraken vowed to confront these allegations and defend the crypto industry’s right to operate in the U.S.

Kraken believed that Congressional action was the best solution to the regulatory uncertainty in the U.S. The company also pledged ongoing support for efforts that bring clarity to the chaotic U.S. regulatory landscape.

In a recent blog post, Kraken clarified its position, citing a past case where the SEC’s theory was rejected by a court. The SEC claimed digital assets on trading platforms were securities, but the Southern District of New York Court disagreed, saying the SEC failed the legal test.

Kraken asserts the SEC’s case will fail for the same reasons. The SEC accuses Kraken of “commingling” funds, a claim seen in other platforms. However, the SEC doesn’t allege missing funds or losses, admitting Kraken is spending earned fees.

The SEC suggests platforms like Kraken can easily register, but there’s no law supporting this. The SEC provides no rules on asset orders, trade clearing, or standards for digital asset transactions.

The demand for compliance is baseless; there’s no existing framework for investment contracts, exchanges, broker-dealers, or clearing agencies.

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Himalay is a full-time journalist at AMBCrypto. A Computer Science graduate, Himalay writes about crypto with a special focus on the latest coin-based updates. He is a fan of gonzo journalism, transgressive fiction, heavy metal, and Manchester United.
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