Kraken Reaches Multimillion Dollar Settlement With SEC

The Securities and Exchange Commission has reached a $30 million settlement with the cryptocurrency platform Kraken that will require it to unwind a program offering investment returns to US users who committed their digital assets to the company.

Kraken’s “staking” program was shut down by the SEC after they alleged that the company had not properly disclosed the risks associated with it. The program, which had advertised annual yields of up to 21%, was allegedly a way to sell unregistered securities.

The recent settlement between the SEC and a cryptocurrency company could mark a turning point for cryptocurrency regulation and the SEC’s broader efforts to bring the industry under its jurisdiction. But according to cryptocurrency advocates, the SEC clampdown on staking could have wider effects that undermine the US cryptocurrency ecosystem.

Kraken Reaches Multimillion Dollar Settlement With SEC

The SEC has accused a company of running a fraudulent “initial coin offering” (ICO). The company is said to have raised over $32 million by selling digital tokens that would give the holder a share in the profits generated by the company. However, the SEC complaint zeroes in on a practice that the industry says is vital to supporting the healthy function of some virtual currencies. When investors agree to contribute, or stake, their cryptocurrency tokens, their contributions become part of the computerized, technical process used to validate transactions. Those who do may be rewarded with additional tokens.

In its complaint, the SEC alleged that Kraken failed to notify users about the lack of protections it offered to those who engaged in staking through Kraken’s program. The SEC also said that Kraken failed to disclose information about the company’s health, the fees it charged, or how the company would handle its customers’ tokens.

Investors have been in the dark about Defendants’ financial condition and whether they have the means to pay the promised returns. In fact, per the Kraken Terms of Service, Defendants reserve the right not to pay any investor returns at all. This has understandably caused concern among investors.

Read Also:

$700 Million Crypto-Fraud: Chinese Exchange Founder Arrested

Will Britcoin Become the Leading Cryptocurrency in the UK

Leave a Comment