Kraken Ordered to Pay $1.25M for Illegally Offering Margined Transactions in US

The US Commodity Futures Trading Commission (CFTC) announced that it has filed and settled charges against crypto exchange Kraken for illegally offering margined retail commodity transactions in digital assets.

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The crypto exchange is required to pay a civil penalty of $1.25 million, and the US regulator also issued a cease and desist order from further violations of regulatory rules.

Founded in 2011, Kraken is one of the leading regulated crypto exchanges around the world, and even holds a crypto banking license in the US state of Wyoming.

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However, it is not allowed to offer margined products in the United States as it is not registered with the CFTC as a futures commission merchant (FCM).

According to the official announcement, Kraken offered digital asset margined products from around June 2020 to July 2021 to its US customers. The exchanges supplied the digital asset or fiat to pay the seller for the asset when a customer took a margined position. The exchange required them to repay or exit the position within 28 days, else it automatically liquidated the positions.

“This action is part of the CFTC’s broader effort to protect US customers,” said Vincent McGonagle, CFTC’s Acting Director of Enforcement. “Margined, leveraged or financed digital asset trading offered to retail US customers must occur on properly registered and regulated exchanges in accordance with all applicable laws and regulations.”