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The SEC has charged Kraken with operating an unregistered platform and improperly commingling customer funds

Kraken has been hit with additional accusations by the U.S. regulator, mere months after a settlement of prior charges.

The United States Securities and Exchange Commission (SEC) filed a lawsuit against Kraken, a leading cryptocurrency exchange, on Monday, accusing it of engaging in securities exchange activities without proper registration. The action, filed in a federal court in San Francisco, is the most recent development in Chair Gary Gensler’s effort to have the SEC regulate cryptocurrencies. Gensler argues that digital assets are investment contracts that are governed by federal securities laws.

The parent firms of Kraken were accused by the SEC of “operating Kraken’s crypto trading platform as an unregistered securities exchange, broker, dealer, and clearing agency.” in a news release. According to the SEC, Kraken, whose business name is Payward Inc., and Payward Ventures Inc. have been making hundreds of millions of dollars since 2018 by facilitating the buying and selling of cryptocurrencies while ignoring securities regulations that are supposed to safeguard investors. Coinbase, a competing exchange, was also subject to similar accusations earlier this year. Worryingly, the SEC claims that Kraken mixed client assets with corporate money, including paying its own expenses from a customer fund account. According to the SEC, this strategy provided “what its own auditor had identified as ‘a significant risk of loss’ to its customers.”

The following cryptocurrencies are included as securities in the SEC complaint: Cardano (ADA), Algorand (ALGO), Cosmos (ATOM), Filecoin (FIL), Flow (FLOW), Internet Computer (ICP), Decentraland (MANA), Polygon (MATIC), Near (NEAR), OMG Network (OMG), and Solana (SOL).

We allege that Kraken made a business decision to reap hundreds of millions of dollars from investors rather than coming into compliance with the securities laws. That decision resulted in a business model rife with conflicts of interest that placed investors’ funds at risk.

said Gurbir S. Grewal, the SEC’s Director of the Division of Enforcement

Kraken plans to counter the SEC’s stance on digital assets, claiming that lawmakers should choose the best way to govern crypto exchanges and describing the agency’s position as “incorrect as a matter of law, false as a matter of fact, and disastrous as a matter of policy.”

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