The U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against Kraken, one of the world's biggest cryptocurrency exchanges, alleging that it is operating illegally and without the proper registrations.
The lawsuit filed in federal court is the latest step by the SEC to bring crypto under the Wall Street regulator’s purview and subject the industry to U.S. securities laws.
Kraken said it will vigorously defend itself and that Congress should decide how to regulate cryptocurrency exchanges, calling the SEC’s view of digital coins and tokens “incorrect.”
The cryptocurrency exchange also said that the lawsuit will not impact its more than 10 million clients worldwide.
Earlier this year, the SEC filed similar lawsuits against Binance, the world's largest crypto exchange, and Coinbase, the largest such exchange in America. Both are fighting the charges.
The SEC said Kraken has, since 2018, made hundreds of millions of dollars arranging crypto purchases and sales while turning a “blind eye” to securities laws that protect investors.
Kraken was also accused of having substandard internal controls and inadequate record keeping, and of paying its operating costs with money taken from customer accounts.
Failing to register has “resulted in a business model rife with conflicts of interest that placed investors' funds at risk,” said the SEC in a written statement announcing the lawsuit.
The SEC lawsuit seeks a civil fine from Kraken and a halt to it acting as an exchange without registering.
Privately held Kraken was founded in 2011 and is backed by several venture capital firms, including Blockchain Capital, Hummingbird Ventures and SkyBridge, among others.
