Kraken Agrees to Cease Staking Services for U.S. Clients
Zach Anderson Feb 12, 2023 06:40
Kraken settled with the SEC by ending its staking program and paying $30 million in disgorgement, prejudgment interest, and civil penalties.
The United States Securities and Exchange Commission and the cryptocurrency exchange Kraken have come to an agreement that will result in Kraken no longer providing staking services or programs to customers located in the United States.
The Securities and Exchange Commission (SEC) stated in a press release dated February 9 that it had filed charges against Kraken for "failing to register the offer and sale of their crypto asset staking-as-a-service program." According to the SEC, these programs qualify as securities and fall under its jurisdiction. The cryptocurrency company has come to an agreement wherein it will pay $30 million in disgorgement, prejudgment interest, and civil penalties, and will also stop offering its staking service to consumers in the United States.
"Kraken not only offered investors outsized returns untethered to any economic realities, but it also retained the right to pay them no returns at all," said Gurbir Grewal, director of the SEC's Division of Enforcement. "Kraken offered investors outsized returns untethered to any economic realities." "During this whole time, it gave them no insight whatsoever into, among other things, its financial status or whether or not it even had the wherewithal to pay the promoted returns in the first place,"
According to the complaint filed by the SEC, Kraken has been promoting its cryptocurrency staking services as a "easy-to-use platform and advantages that arise from Kraken's efforts on behalf of investors" since 2019 when it began selling such services to consumers in the United States. However, according to the commission's allegations, Kraken customers essentially lost ownership of their tokens when they offered them to the staking program. This exposed them to further risk and provided "very little security" for their investments.
In a blog post dated February 9, Kraken said that it will continue to provide staking services for customers located outside of the United States via a different business.
After authorities from the Internal Revenue Service petitioned the U.S. District Court for the Northern District of California to enable it to issue summonses trying to gather information on Kraken users, the Securities and Exchange Commission reached a settlement with the company and announced it. The document that was filed in court on February 3 states that Kraken did not answer to a similar summons that was given in May 2021.
In the lawsuit that took place in 2021, the cryptocurrency exchange had been asked to produce information on individuals who had carried out the digital currency equivalent of $20,000 in transactions over the course of a single year between 2016 and 2020. Officials from the United States said that Kraken "failed to comply with the summons" and did not deliver the "books, documents, papers, and other material" that were demanded of them.
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