Crypto Analyzer

Kraken Ordered to Cease Unregistered Crypto Staking Services and Pay $30 Million by SEC

Kraken was accused by the Securities and Exchange Commission of failing to register the sale and offer for their crypto asset staking as-a-service program. Kraken was required to cease the program immediately, pay $30 million prejudgment interest and civil penalties as part of the settlement.

Kraken began offering its staking services to investors in 2019. It pools crypto assets and stakes them for investors in return for up to 21 percent investment returns. Kraken, according to the SEC’s complaint, promoted its staking program as an easy-to use platform. It also promised regular payouts and investment returns.

“In case after case, we’ve seen the consequences when individuals and businesses tout and offer crypto investments outside of the protections provided by the federal securities laws: investors lack the disclosures they deserve and are harmed when they don’t receive them,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement.

Gary Gensler (SEC Chair) warned that all crypto intermediaries including those offering staking-as a service must register and provide complete, fair, truthful, and investor protection. He said that the current action should make it obvious to the marketplace that these providers must follow federal securities laws.

Kraken agreed to pay the monetary penalties and to stop the staking program. A final judgment was also filed, subjected to approval by the court. It would permanently ban them from violating Securities Act of 1933, and from selling securities via crypto asset staking programs.

The SEC’s enforcement action serves as a reminder for all crypto companies to adhere to securities laws and regulations to protect investors. With assistance from Sachin, Eugene Hansen, James Connor, and Elizabeth Goody (SEC), the investigation was conducted.