San Francisco-based Kraken, one of the largest cryptocurrency exchanges globally, is facing the heat of a Securities and Exchange Commission (SEC) probe. The regulator is investigating whether the company broke securities rules related to specific offerings to American clients.
As reported by Bloomberg on February 8th, the investigation is reportedly at “an advanced stage and could result in a settlement” in the coming days, according to sources.
Kraken is the third-largest cryptocurrency exchange, with a daily trading volume of approximately $650 million globally. The San Francisco-based company supports more than 185 cryptocurrencies and allows users to earn rewards through a process known as staking.
The Consequences Of The Kraken Probe
The exact tokens or offerings that are drawing scrutiny are unclear. However, if the SEC takes action against Kraken, it could have significant implications for the crypto industry, which is already facing increased scrutiny from Washington after the collapse of FTX last year.
However, Gary Gensler, the Chairman of the SEC, has cautioned crypto companies that the deadline for registering with the SEC is fast approaching.
If the SEC reaches a settlement with Kraken, it could put pressure on other crypto firms to reach deals with the regulator, which has consistently stated that most tokens being offered are securities subject to the SEC’s rules.
Kraken and the SEC have declined to make any comments on the ongoing investigation. However, according to the report, these types of investigations may not always result in enforcement. There is still the possibility of companies and individuals facing fines and penalties.
In the past, Kraken has had run-ins with US regulators, having reached a settlement with the Treasury’s Office of Foreign Assets Control over allegations of violating US sanctions against Iran.
The company agreed to pay a fine of over $360,000 and to invest $100,000 in sanctions compliance. OFAC recognized Kraken’s voluntary disclosure of the violations and its cooperation with the investigation.
The report also highlighted another investigation currently being conducted by the SEC involving one of Kraken’s competitors, Coinbase Global Inc., regarding its token listings.
While the SEC has not accused Coinbase of offering unregistered securities, it did identify certain tokens listed on the exchange as securities in a lawsuit related to insider trading.
Nevertheless, the crypto industry is facing increased regulatory scrutiny, and the SEC’s investigation into Kraken is just one of many probes into the sector.
The outcome of this investigation will likely have significant implications for the industry and could lead to increased pressure on other crypto firms to reach settlements with the regulator.
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