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Kraken a leading Crypto Exchange faces SEC probe for unregistered securities listings

The US Securities and Exchange Commission (SEC) is investigating the cryptocurrency exchange Kraken for providing digital assets that may qualify as unregistered securities. According to Bloomberg, the inquiry is already advanced and could result in a settlement soon. Neither the regulator nor the bitcoin exchange confirmed the investigation. The SEC is on the lookout for cryptocurrencies that may qualify as unregistered securities, as well as platforms that offer them. It has seized many such minor cryptocurrencies, most of which were fraudulent, and is also engaged in a legal battle with Ripple over the classification of XRP coins as unregistered securities. According to Kraken’s website, it provides over 185 cryptocurrencies globally, many of which may not be available in the United States. It is unclear whether the SEC has designated some of these cryptocurrencies as unregistered securities and whether it has taken action against the coin issuers.

Kraken is the third largest cryptocurrency, handling around $650 million in cryptocurrency deals daily. It is one of the oldest cryptocurrency exchanges, having been founded in 2011. It is headquartered in San Francisco. Any action taken against such a corporation could have repercussions for the entire industry. In a separate matter from the ongoing SEC investigation, Kraken paid more than $360,000 in a monetary penalty to the US Treasury Department’s Office of Foreign Assets Control (OFAC) last year for a violation of sanctions on Iran. Furthermore, the exchange agreed to invest an additional $100,000 in strengthening its sanctions compliance processes.

In addition, Kraken’s leadership shifted when Jesse Powell stepped down as CEO, handing over the reins to Dave Ripley. Meanwhile, the exchange is under pressure from the cryptocurrency industry and recently laid off 30% of its global personnel. Furthermore, it ceased operations in Japan, citing market difficulties. Similar SEC inquiries of Coinbase’s crypto listings surfaced last year, but no enforcement action or settlement was reached. However, the SEC filed a lawsuit against a former Coinbase employee and two individuals for insider trading, citing numerous coins listed on the exchange as securities.

However, the US Securities and Exchange Commission is aggressively pursuing crypto loan schemes. The SEC and other US state authorities have reached a $45 million settlement with the crypto lending platform Nexo for promoting and selling unregistered securities. The federal watchdog even sued Gemini and Genesis, claiming that their crypto-lending products were unregistered securities.