Kraken Faces $1.25 Million Fine From CFTC

Mike Dalton

Sep. 28, 2021

The regulator says Kraken failed to register as a futures merchant.

Kraken Faces $1.25 Million Fine From CFTC

Shutterstock photo by sruilk

Key Takeaways

The CFTC has placed a $1.25 million fine on Kraken, stating it failed to register as a futures merchant.
Kraken will need to cease and desist certain activities; this will presumably not affect its main crypto exchange.
Kraken has not yet commented on the matter.

Kraken has been fined by the U.S. Commodity Futures Trading Commission, according to a statement from the regulator.

Kraken Illegally Offered Futures Trading

The CFTC’s Sept. 28 statement says that Kraken failed to register as a futures commission merchant. As such, it illegally offered margined retail commodities to investors between June 2020 and July 2021.

The regulator criticized aspects of Kraken’s service model, noting that users were unable to withdraw assets until repaying obligations. Furthermore, Kraken was able to unilaterally liquidate positions if users did not make repayments within 28 days of exiting a contract, or if the value of the collateral went below a threshold.

Such transactions were “unlawful because they were required to take place on a designated contract market and did not.”

Today’s order requires Kraken to pay a $1.25 million fine and cease and desist activities that violate the relevant regulations.

Presumably, this means that Kraken will only need to suspend futures trading features, not its main crypto exchange. However, the company has not commented on any service changes.

CFTC Has Targeted Other Exchanges

Kraken is just the latest exchange to be scrutinized by the CFTC. In August, BitMEX settled with the CFTC and FinCEN for $100 million almost two years after the regulators began a probe.

In March, Coinbase was fined $6.5 million by the CFTC over providing false information and enabling wash trading. Coinbase also shut down margin trading this year in response to CFTC regulations.

Less recently, the CFTC fined Bitfinex $75,000 in 2016 for offering illegal off-exchange commodity transactions and for failing to register as a futures commodity merchant.

Binance also faced a CFTC probe this year, but it does not seem to have faced any penalties to date.

Disclaimer: At the time of writing this author held less than $75 of Bitcoin, Ethereum, and altcoins.

Disclaimer