Kraken is one of the world’s largest crypto exchanges.
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Crypto exchange Kraken will shut down its U.S. cryptocurrency betting operation and pay a $30 million fine to settle a lawsuit over the sale of unregistered securities, the Securities and Exchange Commission said Thursday.
The SEC alleged that Kraken failed to register the offering and sale of Kraken’s bid program as a service.
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Many centralized exchanges, such as Kraken and Gemini, offer customers the opportunity to stake their tokens to profit from their digital assets that would otherwise sit on the platform. When betting on crypto, investors typically store their crypto assets with a blockchain validator that verifies the accuracy of transactions on the blockchain. Investors can receive additional crypto tokens as a reward for locking these assets.
Kraken advertised on its website returns of up to 20% per annum through its staking product. The exchange also promised on its website to deliver these rewards to customers twice a week.
“Whether through staking as a service, lending, or other means, crypto-intermediaries, when offering investment contracts in exchange for tokens to investors, must provide the proper disclosures and safeguards required by our securities laws,” Chairman SEC Gary Gensler said in a statement.
Kraken neither admitted nor denied the allegations in the SEC complaint.
This is the latest in a series of SEC actions targeting the crypto industry, and comes just weeks after the SEC said that crypto lender Genesis and crypto exchange Gemini allegedly offered and sold unregistered securities.
Crypto exchange shares Coinbase fell sharply on Thursday after CEO Brian Armstrong warned that potential SEC action on crypto retail would be a “terrible path.”
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