The US Securities and Exchange Commission’s (SEC) crypto crackdown has not slowed down as exchange Kraken has been hit with a lawsuit by the financial regulator.
The SEC claims that Kraken has been operating as an unregistered broker, clearinghouse and exchange. The lawsuit further alleges that the crypto exchange has violated federal securities laws, a similar claim to that of Binance and Coinbase.
The lawsuit, which was filed last Monday (20 November), accuses Kraken of posing a “significant risk” by commingling $33bn of investor funds with company assets, thus breaking SEC guidelines.
The SEC lawsuit states: “Kraken has held at times more than $5bn worth of its customers’ cash, and it also commingles some of its customers’ cash with some of its own. In fact, Kraken has at times paid operational expenses directly from bank accounts that hold customer cash.”
Whilst the SEC is seeking to permanently ban Kraken from operating in the US, as well as a fine stemming from alleged illegal funds, the financial regulator appears to remain adamant in its stance against cryptocurrencies that attempt to fly under its supervision.
In the same vein as the Kraken lawsuit, the US financial regulator’s Chair, Gary Gensler, has reiterated that he believes that cryptocurrencies on unregistered exchanges should be classed as securities – a regulated financial instrument that can be used for trade in the private market.
However, many officials at crypto exchanges have criticised Gensler’s perceived hostile stance against them, as well a lack of clarity regarding crypto regulations in the country.
Kraken immediately responded to the lawsuit and defended itself from the allegations, echoing some of the same sentiments from Binance and Coinbase.
“We disagree with the SEC’s complaint against Kraken, stand firm in our view that we do not list securities and plan to vigorously defend our position,” Kraken said in a statement.
“The SEC has repeatedly challenged crypto exchanges to come in and register without a single law supporting their position and no clear path to registration. And despite opposition from lawmakers, the SEC continues to pursue legal action against these crypto exchanges.
“It is disappointing to see the SEC continue down its path of regulation by enforcement, which harms American consumers, stunts innovation and damages U.S. competitiveness globally.”