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Cryptocurrency exchange kraken has entered into an agreement with US securities and currency exchange to stop offering staking services or programs.
In a Feb. 9 announcement, the SEC said it had charged Kraken with “failing to register the offer and sale of their crypto asset staking-as-a-service program,” which the commission claims qualified as securities under its purview. The crypto company has agreed to cease operations of its staking program and to pay $30 million in patronage dividends, pre-established interest and civil sanctions.
Not only did Kraken provide investors with greater returns than any economic reality. “All the while, it provided them zero insight into, among other things, its financial condition and whether it even had the means of paying the marketed returns in the first place.”
Today we charged Kraken with failing to register the offer and sale of their crypto asset staking-as-a-service program, whereby investors transfer crypto assets to Kraken for staking in exchange for advertised annual investment returns of as much as 21 percent.
— U.S. Securities and Exchange Commission (@SECGov) February 9, 2023
The SEC’s complaint states that Kraken had been offering its crypto staking services to users since 2019, advertising it as an “easy-to-use platform and benefits that derive from Kraken’s efforts on behalf of investors.” According to the SEC's complaint, Kraken has been providing crypto sequencing services to users since 2019, promote it as a "user-friendly platform and the advantages that flow from Kraken's efforts on behalf of investors."
Related: Getting rid of crypto staking would be a ‘terrible path’ for the US — COINBASE CEO
News of the SEC settlement followed officials from the Internal Revenue Servicepetitioning the U.S. District Court for the Northern District of California to allow it to issue summons aiming to obtain information on Kraken users. According to the Feb. 3, Kraken failed to answer a similar subpoena issued in May 2021.
In the 2021 case, the crypto exchange had been ordered to provide information on users who conducted the equivalent of $20,000 in crypto transactions over the course of a year between 2016 and 2020. With respect to 2021, the crypto exchange was ordered to provide information about users who performed the equivalent of $20,000 in crypto operations in a year from 2016 to 2020.
