The Securities and Exchange Commission (SEC) accused Kraken of failing to register its staking program as a crypto asset service.
The Securities and Exchange Commission (SEC) charged Payward Ventures, Inc. and Payward Trading Ltd., commonly known as Kraken, for failing to register the offer and sale of their staking program as a crypto asset service. The program allowed investors to transfer crypto assets to Kraken for gambling in exchange for advertised annual investment returns.
According to the SEC complaint, Kraken has been offering and selling its staking services since 2019, pooling certain crypto assets transferred by investors and staking on behalf of investors. Staking involves locking cryptographic tokens with a blockchain validator in exchange for a reward in new tokens.
Kraken has agreed to immediately stop offering or selling securities through the staking services and to pay $30 million in repayment, pre-judgment interest, and civil penalties. In addition, Payward Ventures and Payward Trading, without admitting or denying the allegations, have consented to a final judgment that would permanently bar them from violating the Securities Act of 1933.
SEC Chairman Gary Gensler commented: “Today’s action should make it clear to the market that staking-as-a-service providers must register and provide full, fair and truthful disclosure and investor protection.” SEC Division Enforcement Director Gurbir S. Grewal added: “Today, we take another step to protect retail investors by shutting down this unregistered cryptocurrency participation program.”
The SEC’s complaint also alleges that Kraken claimed that its staking investment program offered easy-to-use benefits and strategies to earn regular investment returns, but gave investors zero insight into their financial condition, among other things. The research was conducted by Laura D’Allaird and Elizabeth Goody, under the supervision of Paul Kim, Jorge G. Tenreiro, and David Hirsch, with assistance from Sachin Verma, Eugene Hansen, and James Connor.
