Kraken Seeks Dismissal of SEC Lawsuit, Citing Overreach and Unfair Terms
Summary:
Kraken, a cryptocurrency exchange, is seeking to dismiss a Securities and Exchange Commission (SEC) lawsuit from November, claiming that it unfairly extends the agency's jurisdiction. The SEC alleges Kraken mixed client money and didn't register as a securities exchange. Kraken warns that the SEC's stance could have wide implications, turning ordinary assets into securities. Additionally, the crypto exchange settled with the SEC in February 2023 for $30 million and agreed to halt offering crypto-staking products to U.S. customers.
Kraken, a cryptocurrency exchange, has submitted a request to discard a lawsuit initiated by the Securities and Exchange Commission (SEC) in November on the ground that it establishes an unsafe benchmark for the scope of the agency's jurisdiction. The SEC's lawsuit alleged that Kraken mishandled clients' funds and failed to formally register as a securities exchange, broker, dealer, and clearing agency. Kraken submitted its request to dispose of the lawsuit on February 22nd.
Along with the dismissal request, Kraken published a blog post expressing their counter-argument against SEC's theory. They pointed out the SEC's ideology to form an investment contract with no actual contract, post-sale obligations, or any issuer-purchaser interaction. According to Kraken, such theory lacks a limiting principle, giving the SEC unchecked control over commerce and potentially paving the way for private securities law claims.
Kraken pointed out the dangerous implications of SEC's theory, suggesting that it could turn ordinary assets or commodities, like sports memorabilia, trading cards, luxury timepieces, or even diamonds, into securities.
Last year, the SEC filed a lawsuit against Kraken, accusing that the exchange profited millions of dollars by unlawfully aiding the purchase and sale of crypto asset securities. Moreover, the SEC alleged that Kraken blended traditional services of an exchange, broker, dealer, and a clearing agency, without getting formal registration with the SEC, as required by law.
In February 2023, Kraken negotiated a $30 million settlement with the SEC and acquiesced to stop extending crypto-staking products and services to US clients.
More details are awaited as the story unfolds.
Published At
2/23/2024 4:45:33 AM
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