Cryptocurrency exchange Kraken has reached an agreement with the United States Securities and Exchange Commission 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 firm has agreed to cease operations of its staking program as well as pay $30 million in disgorgement, prejudgment interest, and civil penalties.
“Kraken not only offered investors outsized returns untethered to any economic realities, but also retained the right to pay them no returns at all,” said the SEC’s Division of Enforcement director Gurbir Grewal. “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 stated that Kraken had been offering its crypto staking services to users since 2019, advertising it is an “easy-to-use platform and benefits that derive from Kraken’s efforts on behalf of investors”. However, the commission alleged Kraken users effectively lost control of their tokens by offering them to the staking program, imparting them with additional risk and “very little protection”.
Kraken’s settlement will be subject to court approval before becoming finalized.
This story is developing and will be updated.