CFTC Imposes Penalty of US$ 1.25 Million against Crypto Firm Kraken

Kraken’s operator namely Payward Ventures has been penalized by Commodity Futures Trading Commission (CFTC) with a fine of US$ 1.2 Million over the allegation of offering margin-based commodity trading on the basis of virtual assets, which also included virtual currencies such as Bitcoin, without obtaining prior registration from CFTC.

US regulators i.e. Commodity Futures Trading Commission (CFTC) and Securities & Exchange Commission (SEC) are actively taking enforcement actions against crypto firms. CFTC has revealed on 28th September, 2021, that it was forced to take enforcement action against Kraken. It was informed that a penalty amounting to US$ 1.25 Million has been imposed upon the crypto firm-cum-bank.

CFTC’s order stemmed from an ongoing investigation in which Kraken was accused of offering commodity trading on the basis of digital currencies. Such an activity, if found prover, is regarded as “illegal activities” under the law against CFTC is empowered to take action. Since, at the backend, Kraken is run by its operator namely Payward Ventures, therefore, the order has been issued to Payward.

CFTC’s order notes that Kraken will submit an amount of US$ 1.25 Million as a penalty in the form of civil monetary fine. The firm was found involved in offering margin-based commodity trading on the basis of cryptocurrencies. However, such activities are illegal until and unless registration hasn’t been sought from the regulator i.e. CFTC. The order also notes that Kraken was not authorized to allow Bitcoin commodity trading or any other virtual currency commodity trading. Violations of specific provisions under the Commodity Exchange Act, have been levelled against Karaken in the order.

The period in question in which such trading was allowed by Karaken was reportedly June 2020 till July 2021. CFTC also made mention of the three transactions which were claimed to be in violation of the Exchange Act.

Vincent McGonagle, who is currently acting as CFTC’s Enforcement Director, said that public protection required taking of such actions. In the future as well if CFTC will find anyone violating the law, the violator will be treated accordingly under the law. There shall be no lose ends and the law will be implemented upon everyone without fear or favor to anyone. If someone wants to offer margin-based trading then the person would make sure that it obtains registration. Lack of registration would make the trading illegal and liable for penal actions by CFTC, clarified McGonagle.

CFTC’s present action is similar to that which was taken last month against another crypto firm namely Bitmex. In the case of Bitmex, firm was fined for US$100 Million and the enforcement action also entailed issuance of show cause notice. However, crypto community came in aid of Bitmex and criticized enforcement action on the pretext that the firm was handpicked and targeted.