Kraken Faces Heat from SEC over Unregistered Securities: Report

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Kraken, one of the leading cryptocurrency exchanges, is reportedly being investigated by the United States Securities and Exchange Commission (SEC) over whether it breached rules around the offering of securities.

Cryptocurrency exchanges are facing heightened scrutiny from the SEC following the spectacular collapse of Sam Bankman Fried’s FTX Empire. As per reports, the US financial watchdog will increase its scrutiny of crypto-trading firms and investment advisors as well as Environmental, Social and Governance (ESG) funds, among other issues on its list of top oversight priorities for 2023. Recently, SEC Chair Gary Gensler said,

”In a time of growing markets, evolving technologies and new forms of risk, our Division of Examinations continues to protect investors. In executing against the 2023 priorities, the Division will help ensure compliance with the federal securities laws and rules.”

Kraken in Hot Waters

Kraken Faces Heat from SEC over Unregistered Securities: Report

According to a new report, the SEC is investigating whether Kraken offered unregistered securities that could lead to a settlement in the coming days. However, since the probe is still at an initial stage, it is not clear which offerings are being scrutinized by the securities regulator. Neither Kraken nor the SEC divulged any further details regarding the investigation.

This comes on the heels after the crypto exchange closed its office in Abu Dhabi less than 12 months after receiving regulatory approval in the country. Previously, Kraken had announced its plan to cut its global workforce by over 30%.

It seems the fresh investigation will have a wider ramification for the digital asset industry as the SEC cracks down on several crypto outfits. It also follows SEC Chair Gary Gensler’s warning to cryptocurrency firms to “come into compliance” with securities laws after crypto exchange FTX filed for bankruptcy.

SEC Ramps Up Investigation

In January, it also hit Genesis and Gemini, two popular crypto exchanges, with charges related to unregistered securities. Last year, the SEC was also reportedly investigating Yuga Labs, the company behind Bored Ape Yacht Club (BAYC), for possible violations of investor disclosure rules surrounding sales of its non-fungible tokens (NFT).

Not just the SEC, but, the Commodity Futures Trading Commission (CFTC) is also pursuing firms that fail to register crypto products that qualify as derivatives.  Recently, the Treasury Department’s Office of Foreign Assets Control (OFAC) and Financial Crimes Enforcement Network (FinCEN) slapped a penalty on crypto exchange Bittrex for sanctions violation. Earlier in a brazen attempt to defile crypto, Gensler had compared the digital assets industry with casinos, citing,

“The casinos in this Wild West are non-compliant intermediaries.”


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