Neither the regulator nor the exchange officially confirmed the investigation.
The probe is believed to be in advanced stages with possibilities of a settlement.
Kraken is being investigated by the SEC.
The probe is already far along, and a settlement may happen shortly, according to a Bloomberg story. Both the regulator and the bitcoin exchange, though, declined to confirm the investigation.
The SEC is on the lookout for cryptocurrencies that can be considered unregistered securities as well as the platforms that sell them. It has uncovered several of these tiny coins, most of which were fraud, and is also engaged in a legal battle with Ripple over the tokens’ classification as unregistered securities.
On its website, Kraken claims to support more than 185 cryptocurrencies worldwide, many of which could not be available in the US. It needs to be made clear whether the SEC is also initiating action against the cryptocurrency issuers in addition to classifying certain of these cryptocurrencies as unregistered securities.
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According to Coinmarketcap, Kraken is the third-largest cryptocurrency, conducting daily trades of around $650 million. It is one of the first cryptocurrency exchanges, having been founded in 2011, with its headquarters in San Francisco. Any action taken against such a business could have an impact on the entire sector.
In a case unrelated to the ongoing SEC investigation, Kraken last year paid a fine of over $360,000 to the US Treasury Department’s Office of Foreign Assets Control (OFAC) for breaking Iranian sanctions. The exchange has committed to spending an additional $100,000 to improve its sanctions compliance measures.
On top of that, Jesse Powell’s resignation as Chief Executive and the subsequent transfer of responsibility to Dave Ripley resulted in a leadership transition at Kraken. The exchange has reduced 30% of its global personnel due to pressure from the cryptocurrency industry. Additionally, it stopped operating in Japan, blaming the state of the market.
Last year, there were reports of similar SEC investigations of Coinbase’s cryptocurrency listings, but no enforcement action or settlement resulted from those reports. The SEC, on the other hand, filed a complaint against a former Coinbase employee and two other people for insider trading and declared many coins traded on the exchange to be securities.
The US securities regulator is, however, advancing crypto loan products vigorously. The SEC and other US state authorities recently reached a $45 million settlement with the cryptocurrency lending platform Nexo over the offering and sale of unregistered securities. The federal watchdog even sued Gemini and Genesis, claiming that their cryptocurrency lending services were unregistered securities.