SEC In Advanced Stage Of Investigation Over Kraken's Securities Violation: Report

The U.S. Securities and Exchange Commission (SEC) is currently in the advanced stage of investigating Kraken, one of the largest centralized cryptocurrency exchange platforms by trading volume, over allegations of securities violation, according to a report.

The U.S. financial regulator, already in the advanced stage of an investigation, is looking into whether Kraken offered unregistered securities, which could eventually lead to a settlement in the coming days, Bloomberg reported, citing a person who chose to remain unnamed since the case has not been publicized.

Unfortunately, the report did not reveal which token Kraken offered that led to this scrutiny by the financial regulator.

In December, SEC chairman Gary Gensler said that most cryptocurrencies fall under his agency's jurisdiction and mentioned in an interview in the same month that "the runway is getting shorter" for crypto businesses to register with the SEC.

The investigation, while already in its late stage, is not guaranteed to lead to enforcement action.

It is worth noting that this is not the first time Kraken has been investigated by an American financial agency.

In November 2022, the cryptocurrency exchange platform (CEX) agreed to pay the Office of Foreign Assets Control (OFAC), the financial intelligence and enforcement division of the U.S. Treasury Department, over $360,000 after the agency alleged that it enabled persons in "Iran and elsewhere," which violated sanctions placed in the countries involved.

If the SEC rules against Kraken, it could have a major impact on the cryptocurrency industry, which is already neck-deep in scrutiny with other financial regulators and with Washington following the mega-controversial implosion of the popular crypto empire FTX.

Even though Kraken is one of the largest CEXs by trading volume, it was impacted by the massive blowback of FTX's spectacular collapse.

"We're not insulated from the broader macro and economic environment," Kraken head of strategy Thomas Perfumo admitted, noting that crypto winter "definitely had an effect on the business."

Kraken "specifically had had no material exposure to all of the volatility in the industry when it came to centralized firms collapsing throughout 2022," according to Perfumo.

"We're focused on that long-term vision to increase and to accelerate the adoption of cryptocurrency, and we're focused on delivering a great client experience in the meantime," the crypto executive said, adding that Kraken is "constantly focused on earning our clients trust every single day, day in day out, through things like proof of reserves, even before it mattered."