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SEC charges Kraken for operating as an unregistered securities exchange
- deleted 3y ago[deleted]
- Scott_Sanderson 3y agoKraken has been trading crypto coins since 2011. Why did it take the SEC so long to bring this suit?
- ofslidingfeet 3y agoThe regime changed, so now they're punishing everyone who played ball with disruptive elements of the previous regime's economic plan.
- bozhark 3y agoNot really. Kraken has… expanded enough to reach optics. And the FTX case is done
- freedomben 3y agoYou're not wrong (and I upvoted you because your comment doesn't deserve to be so negative), but I don't think the previous regime was all that friendly toward crypto either... Remember the IRS crackdowns all started under n-1
- Animats 3y agoThe SEC seems to bring about 2 or 3 crypto enforcement actions per month.[1] They're still working down the ICO backlog. Mostly they've been going after issuers and out and out theft. After FTX, political support for crypto deregulation dropped to near zero. FTX, remember, was lobbying for a bill that would allow all the things for which Kraken is now in trouble. That is going absolutely nowhere now. Also, the SEC, CFTC, and Main Justice now have their act together on cooperating to deal with crypto scams. There used to be jurisdictional issues. Now, it's just treated as crime. [1] https://www.sec.gov/spotlight/cybersecurity-enforcement-actions https://www.sec.gov/spotlight/cybersecurity-enforcement-acti...
- cactusplant7374 3y agoI have been waiting for them to go after the YouTuber Tech Lead. It will probably take a while.
- soks86 3y agoFun fact! Stoner Cats 2, from the list of enforcement actions, paid a settlement that was about 10-20% of what they made from their sales! NFTs as an investment offering are still a good way to make money it seems!
- mkii 3y agoAnd legal fees?
- WoahNoun 3y agoThey created a new enforcement division and doubled the number of positions working on crypto enforcement last year. https://www.sec.gov/news/press-release/2022-78 https://www.sec.gov/news/press-release/2022-78
- ComplexSystems 3y agoI guess they just never knew of them before now.
- miohtama 3y agoBecause the of political agenda of Elizabeth Warren and other Democrats who want to protect Wall Street establishment. Prior to this political agenda, the SEC did not care. Now is good time, because the SEC has the required political backing.
- kragen 3y agodisclaimer: no relation
- SeanAnderson 3y agoUhh, what? I've always considered Kraken to be the most rules-abiding exchange - more so than Coinbase. They're quite shrewd in what they're willing to list. I wonder if SEC is charging Coinbase soon, too?
- kklisura 3y ago> I wonder if SEC is charging Coinbase soon, too? Already happened. [1][2] [1] https://news.ycombinator.com/item?id=36211820 https://news.ycombinator.com/item?id=36211820 [2] https://www.sec.gov/news/press-release/2023-102 https://www.sec.gov/news/press-release/2023-102
- SeanAnderson 3y agoAh, I see. Odd that they were allowed to be publicly traded for years while also not operating legally
- starttoaster 3y agoI'm guessing there was some moving of the goal posts at play here, by the feds, because the SEC does a huge background check on the operations of your company before you're allowed to be publicly traded, and if they didn't find anything there, I have a hard time believing they were breaking rules as the rules were written at the time.
- fredgrott 3y agoChecking details of company registration is not the same as a background checK. Let me explain the difference.. I had a series 63 license from The SEC. Here is what I submitted: 1. Background info form to FBI which was checked. 2. Fingerprint form Far different when you register a company as public. Per their own docs they review accounting not background, see https://www.sec.gov/divisions/corpfin/cffilingreview https://www.sec.gov/divisions/corpfin/cffilingreview
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- sillysaurusx 3y agoOh, great. Right when we’re on the verge of receiving our Mt Gox payouts. Ah well, I knew it was too good to be true. The way not to be disappointed is to not get your hopes up involving money.
- steve_taylor 3y agoWhy can’t the Bitcoin payouts be made directly to Bitcoin wallets? Did no one learn from Mt Gox?
- sillysaurusx 3y agoWell, Kraken was the conduit through which payments were going to be made. Japan is … fastidious … to the law. I think they wanted to deal with an actual entity. Hopefully this legal albatross won’t spook them.
- soks86 3y agoGlad to see someone talk about this. It's a bit of a pain. They limited your choices and now the limited choices are facing legal scrutiny. The Japanese lawyer representing Mt. GOX customers is also collecting fees this entire time from the pool of customer funds.
- Auracle 3y agoAt least you’ll probably get some. I had a fair amount on btc-e which the government happily took.
- sillysaurusx 3y agoSorry for your loss. Truly.
- Auracle 3y agoThank you. Luckily I didn't have it all in one place, but it's beyond frustrating that the government effectively took what would have been hundreds of thousands of dollars from me. I could really use that.
- pwb25 3y ago[flagged]
- ahahahahah 3y agolol DEA is pathetic. They are against creating laws for the drug cartels to follow, then they arrest them is this the "land of the free" we hear about?
- starttoaster 3y agoDisingenuous comparisons such as this are to be expected when talking about cryptocurrency/blockchain, I suppose. People commit fraud with money, people commit fraud with cryptocurrency. New avenues for a historical misuse of money, without necessitating the misuse portion to be a player, of course that justifies equivocating an exchange with a drug cartel. Beyond that.. it is very clear that operating a drug cartel is strictly illegal. Operating a cryptocurrency exchange in 2023, it is not completely clear what the requirements are for it to be considered legal or otherwise. In other words, it would be nice to have a discussion about cryptocurrency that wasn't filled with inflammatory bias.
- pwb25 3y agodo the drug cartels ask DEA "which laws can we follow to operate legally in USA?" No. There are laws in place already, which there isn't for crypto
- deleted 3y ago[deleted]
- 2OEH8eoCRo0 3y ago> The SEC alleges that Kraken intertwines the traditional services of an exchange, broker, dealer, and clearing agency without having registered any of those functions with the Commission as required by law.
- kklisura 3y agoI find following more troubling: > As alleged in the complaint, Kraken commingles its customers’ money with its own, including paying operational expenses directly from accounts that hold customer cash. Didn't FTX/SBF do same?
- Ferret7446 3y agoIs that inherently problematic, as long as they're accounting properly?
- Animats 3y agoYes. Because they're gambling with the customers' money. That seldom ends well.
- ForkMeOnTinder 3y agoCommingling doesn't imply gambling. I could borrow $10 from Jim, and $20 from Sue, and deposit them both into the same Chase account which now has $30. As long as the balance stays above $30, everything is fine.
- yieldcrv 3y agoRight, the problem is when leverage and borrowing comes in
- koolba 3y agoYou could let the balance fall below $30 in your example because it’s a loan (“borrow”), not a deposit. If you’re claiming to hold the funds on their behalf and do otherwise (like “investing” them in your less than arm’s length hedge fund), then you’re breaking your fiduciary obligations.
- guessmyname 3y agoKraken has recruited a significant number of Rust developers, or at least individuals keen on learning Rust, over the past few years. This presents a good opportunity for other companies that adhere to legal standards to consider hiring these developers. In 2020, I received an interview invitation from Kraken and subsequently received invitations five times in 2022. The engineering managers I conversed with took pride in having one of the largest Rust development teams in the tech industry, in addition to a substantial number of Go developers. Due to my professional experience with both languages, they expressed considerable interest in bringing me on board. However, I faced rejection twice after accepting two of their invitations in 2022. The first time was due to my preference for utilizing basic yet stable features in Rust, as opposed to the alpha features anticipated by their interviewers. The second rejection occurred because I did not exhibit sufficient interest in their crypto business. While this aligns with their business focus, it seemed like a convenient excuse, given that I had consistently communicated my limited interest in the product, and both the technology and hiring manager appeared to be accepting of that fact. I mean, I don't necessarily align with Apple's mission, but I still got the job there.
- codetrotter 3y ago> This presents a good opportunity for other companies that adhere to legal standards to consider hiring these developers. Kraken is my favorite exchange. They appear to put a lot of effort into abiding by local regulations in all countries they operate. > I had consistently communicated my limited interest in the product, and both the technology and hiring manager appeared to be accepting of that fact This sentence is so weird for me. Why would you want to work for a company if you seemingly don’t care about their product. And conversely, why would anyone ever hire someone for a role if the person looking to get hired doesn’t care about the product?
- guessmyname 3y ago> This sentence is so weird for me. Why would you want to work for a company if you seemingly don’t care about their product. For money, of course. A company’s mission doesn’t pay for my groceries or rent. A substantial compensation package serves as a strong incentive to perform well. > And conversely, why would anyone ever hire someone for a role if the person looking to get hired doesn’t care about the product? That is a good question for the companies that hired me during the last decade to lead some of their projects. I can only speculate that if a company observes a person with a proven track record of successfully leading and delivering products that significantly contribute to revenue, they would prioritize hiring that individual, even if they lack enthusiasm for the product. Of course, it’s ideal to hire someone with both experience and genuine interest, but in my experience, such individuals are the exception rather than the rule. If companies exclusively hired people passionate about their products, they might struggle to find suitable candidates.
- rozap 3y ago(I realize kraken is not a publicly traded company, but...) I want a reverse ETF of companies that sponsor Formula 1 teams, as they seem to attract lots of bottom feeders.
- wslh 3y agoThe main issue I see now is that the SEC should charge himself for not bringing clarity in the space beyond all the scams and frauds. It is ironic that now when you try to use some of the crypto services it asks you if you are in Iran, North Korea, US, etc... I don't think all they were in the same list before.
- ascendantlogic 3y agoI feel like this won't end up going well for the SEC. This whole methodology of telling exchanges "I don't know, you figure it out" when they ask for clarity and then turning around and suing them for not figuring it out is extremely shaky legal ground.
- kova12 3y agosuch approach has been working fine for IRS
- nijaar 3y agoNot really bc the IRS actually has puts guidelines (although kind of slow) for crypto unlike the SEC
- kadoban 3y agoLaw enforcement has no obligation to explain the laws to you.
- stevev 3y agoIt’s congress’s fault for not defining the rules and for giving the SEC a hammer.
- armatav 3y agoExcept when they sue you for it.
- polygamous_bat 3y agoThey will happily explain it to the judge with you in the room, I believe.
- tripplyons 3y agoI hope some branch of the government gives an explanation.
- KrakenEng 3y agoKraken's response: https://blog.kraken.com/news/kraken-continues-to-fight-for-its-mission-and-crypto-innovation-in-the-united-states https://blog.kraken.com/news/kraken-continues-to-fight-for-i... > The complaint against Kraken alleges no fraud, no market manipulation, no customer losses due to hacking or compromised security, and no breaches of fiduciary duty. It includes big dollar amounts but does not allege a single one of those dollars is missing or misused – no ponzi scheme, no failure to maintain adequate reserves, and no failure to preserve the identity of client funds 1:1. Indeed, none of these things would be true. > Instead, the complaint makes a technical argument: that Kraken’s business requires special securities licenses to operate because the digital assets we support are really “investment contracts.” This is incorrect as a matter of law, false as a matter of fact, and disastrous as a matter of policy. ... > The SEC already tried this theory and a court rejected it outright. The SEC argued in that case that digital assets bought and sold on trading platforms were really securities transactions. The Federal Court for the Southern District of New York disagreed, ruling that the SEC failed entirely to satisfy the relevant legal test. The court held that the SEC’s unprecedented legal theory was contrary to the “economic reality” of such transactions. The SEC’s case against Kraken will fail, too, and for the same reasons. > The SEC alleges that Kraken “commingled” its own funds with its clients’. This is a similar allegation already made of other crypto trading platforms. The SEC cannot and does not allege that any customer funds are missing, or any loss has occurred. Nor does it allege that any loss will occur. The complaint itself concedes that this so-called “commingling” is no more than Kraken spending fees it has already earned. > The SEC famously argues that digital asset trading platforms like Kraken can simply “come in and register” with the agency. As most securities law experts know, there is not a single law on the books supporting this position. The SEC has promulgated no rule describing how an order in a digital asset should be matched, no guidance on how a trade should be cleared, and articulated no standards for how to broker a digital asset transaction. The allegation is hollow; there is no such thing as an exchange, broker dealer, or clearing agency for investment contracts. The SEC is demanding compliance with a regime that doesn’t exist.
- TacticalCoder 3y agoMy favorite part is this: > Meanwhile, groups of lawmakers from both sides of the aisle have questioned what they call SEC’s “regulation via enforcement” approach. They have asked why the agency’s actions against crypto firms seem less focused on “compliance and customer protection,” but were instead “calculated for maximum publicity and political impact.” Others have observed that the SEC’s strategy “does not protect the public.” Indeed, this suit does nothing to protect the public. Like those in complaints that have come before, its allegations are factually incorrect, contrary to law, and the wrong way to create policy in the United States. To me the SEC and Gary Gensler are going to get their arses handed to themselves once again.
- duped 3y agoThese are the same guys that encourage their employees to own guns and not tell anyone they work for them. I kind of expected their response to be "over my dead body" than anything reasonable.
- robbywashere_ 3y agoSo much hubbub for something completely worthless going to zero anytime and has no use for anyone but criminals. Why does the SEC even care about something so inconsequential.
- baq 3y agoReal people lose real money when it goes to zero.
- robbywashere_ 3y agoCrypto is tulip bulbs! What’s the big deal. Why does the sec care about something so worthless
- J_Shelby_J 3y agoThere is literally people in this thread discussing how their legitimate businesses pay international employees in stable coins because it would be too difficult or costly to use traditional methods. I’m all for crypto criticism, but this blind adherence to anti-crypto tribalism is embarrassing.
- JohnsonHolt 3y ago[dead]