Kraken Questioned By The SEC Over The Sale Of Unregistered Securities

Updated: 10 February 2023

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What – Kraken has appeared on the radar of the U.S. SEC due to its sale of alleged unregistered securities.
Why – The crypto exchange Faces SEC Charges for Alleged Securities Law Violations
What Next – According to the report, the company is to pay $2.5 million to SEC. This is not the first time Kraken is facing such fines.

The sale of unregistered securities misleads investors about the value of their investments. To avoid such occurrences, the SEC (Securities and Exchange Commission) takes enforcement actions against companies for violating such a law. These actions may include significant fines and other penalties. It also demands that companies provide detailed information about their operations and finances, as it’ll help to protect investors from fraudulent or deceptive practices.

The SEC Investigates Kraken Sale of Unregistered Securities

Generally, the United States SEC considers the sale of unregistered securities a severe violation of federal law. Thus, the commission demands that every exchange registers its securities with it to gain the rights to trade them in the public market.

Recently, Bloomberg announced a significant enforcement action from the SEC against an American digital asset exchange, Kraken. According to the announcement, the SEC charged the company with violating securities laws. In addition, it noted that it offered and sold securities without registering them with the commission or qualifying for an exemption from registration.

The SEC’s investigation process has become more severe and alarming, and it may take the crypto firm a few days to settle the query. However, according to the report from Bloomberg, many crypto investors are now familiar with the ongoing case.

Before now, Kraken had raised $1 million from most of these investors, including individuals, trusts, and entities. The company also used a social media marketing campaign to promote its offering. However, the SEC found that the company provided investors with false statements such as the nature of the offering, the use of proceeds, and the management team’s experience.

As a result, the SEC has ordered the company to pay $2.5 million in disgorgement and civil penalties. The company has also agreed to cease future violations of the securities laws. Additionally, the SEC has barred the company’s principal from associating with any broker, dealer, or investment advisor.

Similar Occurrences In The Past

This is not the first encounter the crypto exchange has had with the US SEC regulators. Toward the end of 2022, Kraken paid over $362K to the U.S. Treasury Department’s OFAC (Office of Foreign Assets Control for violating agreements against Iran.

According to the report, the crypto exchange performed about 826 transactions to Iran users against the U.S. sanction. These transactions were worth about $1.68 million. In addition to the $362K paid at the time, the firm also gave $100K in line with the sanction compliance controls.

The total amount was meant to be over $272 million. However, the compliance of the crypto firm helped to reduce the debt.

These happenings have brought the crypto company under the investigation of the US SEC regarding the offering of securities. Another company under the SEC radar is Coinbase. Per the report, one of its employees was also guilty of insider dealings with users.

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