CFTC fines Kraken $ 1.25 million for alleged illegal offer


The United States Commodity Futures Trading Commission, or CFTC, orders crypto exchange Kraken to pay more than $ 1 million in civil monetary penalties related to allegations that the exchange violates commodity exchange law.

In a September 28 statement, the CFTC said that the United States-based cryptocurrency exchange, Kraken, operating as Payward Ventures, had not registered as a futures trader and illegally offered retail commodity transactions with margin in digital assets. The order requires the exchange to pay a fine of $ 1.25 million and “cease and desist from any further violation of the Commodity Exchange Act,” the law under which the CFTC derives much of its money. executive power over commodities and futures trading.

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“This action is part of the CFTC’s larger effort to protect US customers,” said Vincent McGonagle, CFTC’s acting director of enforcement. “Margin, leveraged or funded digital asset trading offered to US retail clients must take place on properly registered and regulated exchanges in accordance with all applicable laws and regulations. “

The CFTC case alleges that Kraken “offered commodity margin trading in digital assets” to ineligible US clients from June 2020 to July 2021. Kraken has since changed its policy on margin trading , but until June 2021, clients had to close or settle their positions in 28 days. According to CFTC, these shares represented the company operating illegally because the transactions did not take place in a designated contract market.

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“If the repayment was not made within 28 days, Kraken could unilaterally force the liquidation of the margin position,” the CFTC said. “Kraken could also initiate a forced liquidation if the value of the collateral falls below a certain threshold percentage of the total outstanding margin. As a result, the actual delivery of the purchased assets did not take place. “

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The enforcement action is apparently small compared to the size of a major crypto exchange like Kraken – some estimates place the company at a valuation of $ 10 billion, with the monetary penalty representing 0.0125% of that value. In contrast, the CFTC and the Financial Crimes Enforcement Network fined BitMEX $ 100 million in August.

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Dan Berkovitz, current CFTC commissioner and soon to be general counsel for the Securities and Exchange Commission, previously described the enforcement actions of the first in the crypto space as “aggressive,” but also said the agency “was not looking for not necessarily more authority without more resources. ”Berkovitz will leave the CFTC in October while US President Joe Biden has called on Kristin Johnson and Christy Goldsmith Romero to fill two of the agency’s vacant commissioner seats.