Kraken is embroiled in a legal battle with the Securities and Exchange Commission (SEC) over allegations of illegal activities and inappropriate management of customer funds.

What Happened: The SEC raised accusations against the San Francisco-based firm on Monday, alleging violation of federal securities laws.

The SEC asserts that Kraken operated unlawfully as a broker, clearing agency, and dealer, while improperly mixing customer and corporate funds. Kraken’s independent auditor is quoted by the agency, stating that the company posed a “significant risk” by integrating up to $33 billion of customer cryptocurrency with corporate assets.

“Similarly, Kraken has held at times more than $5 billion worth of its customers’ cash, and it also commingles some of its customers’ cash with some of its own,” a press release by SEC read. “In fact, Kraken has at times paid operational expenses directly from bank accounts that hold customer cash.”

The SEC claims, in a similar vein to previous lawsuits against Binance and Coinbase, that Kraken ran an unregistered exchange.

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Why It Matters: In its legal suit, the SEC is pushing for a permanent prohibition on Kraken’s operations as an unregistered exchange, along with a penalty and the return of illegally obtained profits. In response, Kraken has expressed its disagreement with the SEC’s charges and has pledged to strongly defend its stance.

“Today, the SEC filed a complaint alleging that Kraken operates as an unregistered national securities exchange, broker, and clearing house. We disagree with their claims and plan to vigorously defend our position,” a statement by Kraken read on X.

Price Action: At the time of writing, Bitcoin (CRYPTO: BTC) was trading at $37,600, up 1% in the last 24 hours according to Benzinga Pro.

Photo: Created with an image from Shutterstock and Third Way Think Tank on Flickr

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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.