The US Securities and Exchange Commission (SEC) filed a lawsuit against cryptocurrency exchange Kraken on Monday, accusing it of illegally operating as an unregistered securities exchange.
The regulator alleges that since 2018, Kraken has arranged hundreds of millions of dollars worth of crypto transactions while ignoring securities laws meant to protect investors. The SEC described the exchange’s business model as “rife with conflicts of interest” that placed customer funds at risk.
Kraken denied wrongdoing and said the lawsuit would not impact its over 10 million clients. The exchange argued that Congress, not the SEC, should decide how to regulate crypto platforms.
The lawsuit seeks to halt Kraken’s unregistered exchange activities in addition to a civil penalty and disgorgement of any ill-gotten gains. It follows similar SEC enforcement actions filed against rivals Binance and Coinbase earlier this year.
The crackdown reflects Chair Gary Gensler’s push to bring crypto exchanges under the SEC’s oversight by arguing that digital assets are investment contracts subject to securities laws.
Kraken was founded in 2011 and is backed by investors including Blockchain Capital and SkyBridge. The exchange said it intends to defend itself against the regulator’s claims.