Crypto exchange Kraken to pay $1.25 million to settle CFTC charges

abdelaziz Fathi

San Francisco-based cryptocurrency exchange Kraken has agreed to pay a $1.25 million civil penalty as part of a settlement with the US Commodity Futures Trading Commission (CFTC).

The fine addresses charges that the major exchange illegally hosted leveraged cryptocurrency trades and failed to register as a futures commission merchant (FCM).

Kraken didn’t address the less savory uses of its platform for months, as the regulator says it accepted clients’ trades and funds and therefore acted as an Eligible Contract Participants (ECP), without registering as such with the CFTC.

Worse, Kraken served as the sole margin provider and maintained physical custody of all clients’ assets. As such, the platform operated a facility to trade cryptocurrencies without being approved as a Designated Contract Market.

According to the CFTC statement, the investigation focused on actions between June 2020 and July 2021 as the regulator revs up enforcement of the nascent industry.

“Where a customer purchased an asset using margin, Kraken supplied the digital asset or national currency to pay the seller for the asset. Kraken required customers to exit their positions and repay the assets received to trade on margin within 28 days. Customers could not transfer assets away from Kraken until satisfying their repayment obligation. If repayment was not made within 28 days, Kraken could unilaterally force the margin position to be liquidated. Kraken could also initiate a forced liquidation if the value of the collateral dipped below a certain threshold percentage of the total outstanding margin. As a result, actual delivery of the purchased assets failed to occur,” the CFTC further explains.

The resolution to the CFTC’s tussle with the US second-largest crypto exchange is just the latest example of the regulators’ growing focus on regulating cryptocurrencies. Earlier in August, derivatives exchange BitMex paid a $100 million penalty in one of the biggest settlements ever against a cryptocurrency platform.

Elsewhere, Kraken is seeking approval to operate in Europe by the end of 2021, founder and CEO Jesse Powell said in an interview. Powell pointed out that Kraken has been already engaged in discussions with regulators in Malta, Luxembourg and Ireland.

Kraken’s UK subsidiary, Crypto Facilities, already holds authorisation from the UK Financial Conduct Authority to operate a multilateral trading facility (MTF). Obtaining an MTF license allowed the Kraken-owned firm to expand in ways that more closely resemble a traditional exchange, integrating multiple third-party buyers and sellers.

Kraken has recently expanded its operations in Asia. In 2020, it re-launched its trading services for Japanese residents, nearly two years after it exited the lucrative market.

Read this next

Digital Assets

Centralized exchanges are 10 times more popular than DEXs in Western Europe

Western European traders are found to prefer centralized exchanges over decentralized ones as CEX traffic outpaces DEXs by a factor of ten.

Market News

Stock Market Analysis: Is NVDA Losing Its Leadership?

Since the beginning of the week, the S&P 500 Index (US500) has seen a modest increase of about 0.58%, whereas NVDA’s share price has experienced a decline of approximately 3.8%. This recent divergence raises concerns among Nvidia stock investors — could it signify a loss of NVDA’s market leadership?

Industry News

ESG: Australian regulator wins first greenwashing court case against Vanguard

Vanguard admitted that a notable portion of the securities within both the Index and the Fund did not undergo the promised ESG scrutiny.

Fintech, Uncategorized

BitMEX integrates HALO from Solidus Labs for cross-market surveillance

“The recent approval of the Spot Bitcoin ETF has piqued the market’s interest. As a result of price volatility, the trading volumes for crypto derivatives have gone up substantially. HALO, with its advanced technology and crypto-native detection architecture, will enable BitMEX to smoothly and safely scale trade surveillance across its increased trading volumes and provide the necessary safeguards for new product launches.”

Reviews

IUX Broker Review

IUX, recently rebranded from IUX Markets, stands as a multi-asset Forex broker recognized for its regulatory compliance across various jurisdictions.

Industry News

Horizon Software rebrands to Horizon Trading Solutions

“Horizon Trading Solutions has seen accelerated global growth over the past year to meet the rising demand for our trading solutions and built-for-purpose technology offering. The choice to rebrand represents a key part of this development, while maintaining our heritage and history in the industry.”

Market News

USDJPY has surged to levels last witnessed in 2022. Should we consider opening a short position?

The recent resurgence of the US dollar has propelled USD/JPY to new heights, touching levels not seen since 2022. This surge comes against the backdrop of stable short-term yields and ongoing economic data that fails to signal a significant slowdown, prompting questions about the extent of current monetary easing measures.

Digital Assets

DED Trends on Twitter After Memecoin Snapshot Announcement

Polkadot-backed community coin #DED, made it to the trending charts on X, demonstrating community’s engagement and interest behind the memecoin. 

Digital Assets

BlockDAG Presale Nears $10 Million Amid Toncoin’s Momentum, Green Bitcoin’s Presale, and the Rise of Other Top Cryptos

This article will examine three top trending topics: Toncoin’s potential, Green Bitcoin’s innovative presale, and BlockDAG’s sustainable mining approach. These cryptocurrencies take centre stage for their uniqueness and innovation.

<