The Securities and Exchange Commission (SEC) sued Kraken for failing to register its crypto asset staking-as-a-service program.
The Securities and Exchange Commission (SEC) has charged Payward Ventures, Inc. and Payward Trading Ltd., commonly known as Kraken, for failing to register the offer and sale of its crypto asset staking-as-a-service program. The program allows investors to transfer crypto assets to Kraken for staking in exchange for an advertised annual investment return.
According to the SEC complaint, Kraken has been offering and selling staking services since 2019, collecting certain crypto assets transferred by investors and staking on behalf of investors. Staking involves locking crypto tokens with blockchain validators in exchange for new token rewards.
Kraken has agreed to immediately stop offering or selling securities through the staking service and to pay $30 million in disgorgement, prejudgment interest and civil penalties. In addition, Payward Ventures and Payward Trading, without admitting or denying the allegations, have consented to the entry of the final judgment that will permanently enjoin people from violating the Securities Act 1933.
SEC Chairman Gary Gensler commented, “Today’s action should make clear to the market that staking-as-a-service providers must register and provide full, fair, and honest disclosure and investor protection.” SEC Director of the Division of Enforcement, Gurbir S. Grewal, added, “Today, we are taking another step to protect retail investors by shutting down this unregistered crypto staking program.”
The SEC complaint also states that Kraken claims its staking investment program offers easy-to-use benefits and strategies to generate regular investment returns, but gives investors zero insight into their financial condition, among other things. The investigation 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.