Jimmy Aki
Kraken, one of the market’s largest and most popular cryptocurrency exchanges, is facing a probe by the securities and exchange commission in the United States over possible securities violations.
A Problem of Classification
Earlier this week, Bloomberg reported that the Securities and Exchange Commission (SEC) had opened a probe into certain offerings that Kraken made to its U.S clients. Citing an unnamed person with close knowledge of the matter, Bloomberg stated that the SEC probe is already in its advanced stages, with a possible settlement to come in the next few days.
So far, it is unclear which coins landed Kraken in hot water for listing. However, given the SEC’s long history of targeting specific assets and exchanges that allow American traders to invest in those coins, it’s anyone’s guess.
For now, Kraken and SEC spokespeople have declined to comment publicly on the case or the assets that the agency may or may not be scrutinizing.
Kraken itself isn’t a stranger to probes and violations investigations. Last year, the Office of Foreign Assets Control (OFAC) at the Treasury Department investigated the company for allegedly allowing users in Iran and other sanction-hit countries to buy and sell crypto.
According to a report from the New York Times, the OFAC has been investigating Kraken since 2019. They reportedly found over 1,500 customers on Kraken with residences in Iran, another 149 suspected Syrian-based users, and 83 customers in Cuba.
Sanctions imposed on Iran and many other countries prohibit American companies from reporting goods and services to individuals and businesses in the country. However, the New York Times reported that internal messages from 2019 suggested that Kraken’s top brass, especially former chief executive Jesse Powell, would be willing to sidestep the violations if the potential benefits outweighed any potential penalties.
With Powell eventually stepping down last September, it appears that Kraken’s new boss Dave Ripley might also share the former CEO’s penchant for aggravating regulators. Ripley told Reuters last year that he didn’t see the need to register Kraken with the SEC, claiming that the exchange doesn’t list any tokens that can be considered securities.
He also explained in his incoming letter to the company that his objectives for Kraken are pretty much in lockstep with those of Powell, meaning that he would most likely continue in the standoffish manner of his predecessor.
All Eyes on the SEC
As for the SEC, this is yet another point for the agency to exercise what it believes to be much-needed oversight of the crypto space. Last year, publicly-traded crypto exchange Coinbase revealed that it had faced a probe by the securities watchdog over its token listing processes.
In its quarterly report at the time, the San Francisco-based exchange claimed that the SEC had issued requests for information and documents relating to several of its operations, consumer programs, existing and intended products, and its process of listing assets.
The SEC has primarily alleged that several coins listed on the Coinbase exchange qualify to be classified as securities. While Coinbase believes the tokens do not merit such a classification, the SEC is adamant that they do.
Furthermore, the agency is still embroiled in a legal battle with Ripple Labs over the company’s issuance of XRP tokens during the asset’s initial coin offering (ICO) in 2013. Both parties expect to complete the legal proceedings this year in what should be a landmark case for the entire market.
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This article was written for Business 2 Community by Jimmy Aki.
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