Cryptocurrency exchange Kraken has agreed to pay $30 Million in penalties and close its staking business as part of a settlement with the U.S. Securities Exchange Commission Thursday.
The exchange’s staking program had more crypto assets than $2.7 billion as of April 2022 and advertised annual returns of up to 21%, according to the SEC’s complaint.
Investors could stake their crypto-assets in a pool through the staking program “staked” By Kraken In exchange for rewards, validators validate blockchain transactions. Validators are rewarded for validating information on blockchains. This reward is shared among investors who have staked their assets.
“When investors provide tokens to staking-as-a-service providers, they lose control of those tokens and take on risks associated with those platforms, with very little protection,” the SEC said in a press conference.
The SEC alleged that Kraken’s staking program was an “unlawful offer and sale of securities.” Since This was an unregistered offering. The SEC complained that investors did not have sufficient information. Kraken’s staking program including investment risks, fees charged, and the company’s financial condition.
“Kraken not only offered investors outsized returns untethered to any economic realities, but also retained the right to pay them no returns at all,” Gurbir Grewal, Director This is the SEC’s Division of EnforcementIn a press release
Kraken This settlement was reached without the admission or denial of these allegations.
What Impacts Will This Have On Kraken Customers?
Kraken U.S. customers will be freed from staking as a result of the settlement. Non-U.S. Kraken customers will be able to continue to stake their crypto assets via a separate account of the company’s subsidiary, which was detailed in a blog post.
“Starting today, with the exception of staked ether (ETH), assets enrolled in the on-chain staking program by U.S. clients will automatically be unstaked and will no longer earn staking rewards. Further, U.S. clients will not be able to stake additional assets, including ETH,” Kraken said.
All Stake assets will return to customers’ spot wallets, and rewards on previously staked cryptocurrency assets will be prorated. Feb. 9.
What Effects Will This Have On The Crypto Markets?
Bitcoin prices fell below $21,000 after the settlement announcement, and prices of other major cryptocurrencies, such as ether or binance coin (BNB), also trended lower.<
