According to a person with knowledge of the situation, Kraken, one of the biggest cryptocurrency exchanges in the world, is under investigation by a leading US financial regulator to see whether it violated securities laws while making certain offerings to American consumers.
The Securities and Exchange Commission’s investigation into whether Kraken provided unregistered securities is advanced and may result in a settlement in the near future, according to the individual who asked to remain anonymous because they were discussing a matter that hadn’t been made public. Which tokens or offerings are under investigation wasn’t immediately clear.
Any action taken against Kraken could have a big impact on the sector, which is already under intense scrutiny in Washington as a result of FTX’s failure in the latter part of last year. The SEC has frequently stated that the majority of tokens being traded are securities and should be governed by the agency’s regulations, so a settlement with the regulator might put pressure on other cryptocurrency companies to negotiate agreements with the regulator.
According to SEC Chair Gary Gensler, “the runway is getting shorter” for cryptocurrency enterprises to register with the agency.
Both the SEC and Kraken, whose full name is Payward Inc., chose not to comment. SEC investigations can result in fines and other penalties for businesses and individuals, even though they don’t always result in enforcement action.
According to data, Kraken, situated in San Francisco, is the third-largest cryptocurrency exchange with a daily trading volume of about $650 million worldwide. Although it wasn’t immediately obvious how many cryptocurrencies were accessible to US clients for trading, the company claims to support more than 185 cryptocurrencies on its website.
Staking is a method, that allows users to earn incentives on certain holdings.
Late last year claims that Kraken had broken US sanctions against Iran led to an unrelated settlement with the Treasury’s Office of Foreign Assets Control. A little more than $360,000 in payment and a $100,000 investment in sanctions compliance were agreed to by the corporation. Kraken willingly informed the government about the alleged violations, according to OFAC at the time, and assisted with its investigation.
In 2021, the SEC and cryptocurrency exchange Poloniex LLC reached a settlement over claims that the firm was running an unregistered digital asset exchange.
SEC Probe of Crypto Listings on Coinbase Leads to Falling Shares
SEC is also looking into one of Kraken’s rivals, Coinbase Global Inc., about its token listings. Despite without directly accusing Coinbase of selling unregistered securities, the agency did declare a number of tokens listed on the exchange to be securities in a complaint brought by the agency against a former Coinbase employee and two other people as part of an insider trading investigation.
