Yesterday, the US Securities and Exchange Commission (SEC) filed another lawsuit against the crypto exchange Kraken. The second lawsuit in under a year, the legal action has been rejected by key figures in the crypto industry, including a founding member of the company.
Jesse Powell Criticizes SEC’s Repeat Actions, Foresees Regulatory Struggles
Jesse Powell, Kraken’s former CEO and founder, has criticized the United States Securities and Exchange Commission (SEC) for the lawsuit. As mentioned, the crypto company settled a legal dispute with the regulator in February, agreeing to pay a $30 million fine and shut down their crypto staking services.
In that sense, Powell expressed frustration, suggesting that the SEC’s actions are a “recurring attempt” at regulation, costing companies “significantly” in legal battles and time. “The message is clear,” he stated, “if you can’t afford it, get your crypto company out of the US warzone.”
Kraken claims the platform “stands firm in its mission and commitment to crypto innovation in the United States.” As
Despite the SEC’s complaint, which the company intends to defend itself against, Kraken reassures its clients that its services will continue without interruption.
The company emphasizes that the allegations involve no fraud, market manipulation, or misused funds but rather hinge on a technical argument about whether its digital assets are “investment contracts.”
Kraken Defends Its Operations, Rejects SEC’s Unregistered Securities Allegations
Kraken argues that the law supports its stance, citing a previous case where a federal court rejected the SEC’s theory that digital assets on trading platforms were securities. The company also refutes allegations of commingling funds, stating that it only involves already-earned spending fees.
The company stresses that it is not against regulation but seeks practical rules for digital assets. Kraken’s testimony to the US Congress highlighted its Know Your Customer (KYC) and Anti-Money Launder (AML) policies.
Lawyer John Deaton, an advocate of XRP during its legal fight against the SEC, commented on the regulator’s recent action and its potential impact on the crypto exchange:
Gary Gensler is a despicable and dishonorable regulator. He knew that Kraken believed it was buying peace for the $30M. I know some people are critical of it’s choice to settle and pay the $30M. I wanted them to fight as well. But when you decide to fight, $30M takes you only so far, like maybe only 1/3 of the way – if you’re lucky. (…) When the belief is that $30M buys you peace and keeps good people employed, I understand why a company makes it.
As the legal proceedings unfold, Kraken’s resolve to defend itself could have a long-lasting impact on its finances, depending on the duration of the lawsuit and legal proceedings.
Cover image from Unsplash, chart from Tradingview