SEC Sues Kraken, Calls Cardano (ADA) and Solana (SOL) Securities, XRP Not Included

Kraken, a US-based crypto exchange, has been sued by the United States Securities and Exchange Commission (SEC), for allegedly operating as an unregistered securities exchange, broker, and clearing agency.

In a press release today, the SEC said, “Since at least September 2018, Kraken has made hundreds of millions of dollars unlawfully facilitating the buying and selling of crypto asset securities.”

Read Also: Fox Business Journalist Pinpoints Three Reasons Why the SEC Didn’t Mention XRP as Security in Binance Lawsuit

In the filing, the regulator listed the alleged security assets traded unlawfully by Kraken, including Solana (SOL), Cardano (ADA), Polygon (MATIC), Internet Computer (ICP), Cosmos (ATOM), Algorand (ALGO), Sandbox (SAND), Decentraland (MANA), and Chiliz (CHZ).

According to the SEC, these assets were allegedly mentioned as security assets in the lawsuit against Bittrex, Binance, and Coinbase.

The SEC further claimed that Kraken combines the services of an exchange, broker, dealer, and clearing agency without registering any of those mentioned with them as required by law.

Summary of SEC’s Charges against Kraken

The charges outlined by the SEC say Kraken provides a marketplace that brings together the orders for securities of multiple buyers and sellers using established, non-discretionary methods under which such orders interact, and thus operate as an exchange.

It also says that the exchange approves securities transactions for its customers, acting as a broker in the process.

The regulator also claims that Kraken engages in the business of trading securities for its account without an applicable exception, and thus operates as a dealer.

The SEC also alleged that Kraken serves as an intermediary in settling transactions in various security assets by its customers, thereby acting as a securities depository. This implies that the exchange operates as a clearing agency, as alleged by the regulator.

Read Also: Pro-XRP Lawyer Wants to Represent Coinbase and Binance Customers in SEC Lawsuit

Risking Customers’ Information

In the lawsuit, the exchange also complains that Kraken is endangering its customers’ personal and financial information with its mode of operation, especially in terms of record keeping.

The statement reads, “Kraken commingles its customers’ money with its own, including paying operational expenses directly from accounts that hold customer cash.”

The exchange is also accused of commingling its customers’ crypto assets with its own, creating what its own auditor had identified as “a significant risk of loss” to its customers.”‘

XRP Not in the List

It’s no surprise that XRP was not listed in the lawsuit as a security. This can be attributed to the successive victories recorded against the SEC by Ripple in recent months.

Recall that Ripple was sued in December 2020 by the SEC for allegedly selling the digital token XRP it tagged as a security without proper registration.

However, on July 13, Judge Analisa Torres exonerated XRP by declaring it a non-security asset. But Ripple’s sales of XRP to institutional clients were classified as securities offerings.

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