The SEC charges Kraken with unregistered operations and money laundering

The SEC filed suit against Kraken. The SEC is suing the exchange for engaging in unregistered transactions. Kraken is also accused of providing financial support.

Recently, the US Securities and Exchange Commission (SEC) filed a lawsuit against cryptocurrency exchange Kraken, adding it to the list of platforms facing allegations of operating as securities businesses in the United States without proper registration.

The SEC alleges that Kraken engaged in unregistered activities, acting as an unregistered broker, clearing agency and dealer. The federal regulator says Kraken trades too many tokens without complying with federal securities laws.

The lawsuit identifies certain tokens including unregistered securities that Kraken has traded, including Algorand (ALGO), Polygon (MATIC) and Protocol Near (NEAR). The SEC claims that Kraken played a direct role in introducing these tokens to the investing public.

Mixing money

Specifically, the SEC said Kraken created what it called a “massive risk” by commingling up to $33 billion of client cryptocurrency with its own corporate assets.

The regulator asserted that Kraken mixed more than $5 billion of customer cash with its own and used customer funds for operating expenses.

Kraken, in turn, favors regulatory transparency

In response to the SEC's allegations, Kraken issued a statement confirming its disagreement with the complaint. The cryptocurrency exchange defends its position, emphasizes that it does not list securities and expresses frustration with the regulatory approach of the SEC.

Kraken supports effective US market regulation tailored to the unique risks and rewards presented by cryptocurrencies. The exchange points out that congressional action is necessary to address the lack of regulatory transparency in the US, saying the SEC's regulatory approach is harmful to consumers and harming innovation in the cryptocurrency space.

As the legal proceedings unfold, Kraken, Coinbase and Binance will find themselves in the spotlight as they navigate the regulatory landscape of the cryptocurrency industry amid mounting investigations from the SEC.