Kraken Closes Crypto Staking-as-a-Service and Pay $30M to Settle SEC Charges

Two entities of Kraken​, one of the largest crypto exchanges in the world, have agreed to immediately cease offering or selling securities through crypto asset staking services or staking programs and pay $30 million in disgorgement, prejudgment interest, and civil penalties to settle with the US Securities and Exchange Commission.

According to SEC, the two entities, Payward Ventures, Inc. and Payward Trading Ltd. were charged with failing to register the offer and sale of their crypto asset staking-as-a-service program, whereby investors transfer crypto assets to Kraken for staking in exchange for advertised annual investment returns of as much as 21%.

Kraken not only offered investors outsized returns untethered to any economic realities, but also retained the right to pay them no returns at all. All the while, it provided them zero insight into, among other things, its financial condition and whether it even had the means of paying the marketed returns in the first place, noted Gurbir S. Grewal, Director of the SEC's Division of Enforcement.

"Whether it's through staking-as-a-service, lending, or other means, crypto intermediaries, when offering investment contracts in exchange for investors' tokens, need to provide the proper disclosures and safeguards required by our securities laws," said SEC Chair Gary Gensler. "Today's action should make clear to the marketplace that staking-as-a-service providers must register and provide full, fair, and truthful disclosure and investor protection."