Kraken pays $1.2 million penalty for violating CFTC order

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TL;DR Breakdown: 

  • The US CFTC filed and settled charges against Kraken for violating its CEA order.
  • The exchange was ordered to pay a penalty of $1.2 million. 

US cryptocurrency exchange Kraken violated the Commodity Exchange Act (CEA) of the Commodities Futures Trading Commission (CFTC), according to the regulator’s notice on Tuesday. As part of the settlement with the CFTC, the exchange is expected to pay a penalty of $1.25 million and also desist from offering any more transaction that violates the CEA. 

Kraken failed to register as CFM

Per the regulator, the exchange failed to register as a futures commission merchant (FCM). It also illegally operated margined retail commodity transactions on digital assets like Bitcoin for over a year, starting from June 2020 to July 2021. The laws require that all margined, leveraged, or financed digital asset trading must be conducted on registered and regulated platforms, especially if offered to retail U.S. customers.

Kraken conducted margin trading for US customers, where it allowed the traders to exit their positions and repay the assets within 28 days. Their positions will be automatically liquidated by the exchange if the price dips or the traders fail to repay the assets within the stipulated period. These transactions should only take place on a registered and regulated exchange; hence, Kraken constituted unlawful transactions per CFTC. 

The CFTC has filed and settled the charges against the exchange. “This action is part of the CFTC’s broader effort to protect U.S. customers,” said Acting Director of Enforcement Vincent McGonagle.

Kraken prominence in crypto

Kraken is one of the popular and fast-growing digital currency trading platforms in the United States and globally. Recently, it solidified its presence in the US market by launching its mobile app that allows users to trade over 50 cryptocurrencies. The exchange also has the interest to go public by 2022 via a direct listing.

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Ibiam Wayas

Ibiam is an optimistic crypto journalist. Five years from now, he sees himself establishing a unique crypto media outlet that will breach the gap between the crypto world and the general public. He loves to associate with like-minded individuals and collaborate with them on similar projects. He spends much of his time honing his writing and critical thinking skills.

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