Jesse Powell criticises SEC after Kraken lawsuit

Kraken co-founder Jesse Powell called the SEC “the main brake” after the suit against the exchange he co-founded and warned businesses to “flee the United States”.

USA’s top decel is back with another assault on America. The masochists haven’t been happy with the beatings they’ve been taking in NY and are shopping for a different flavor of RegDom in CA. I thought we settled all their concerns for $30m in Feb. Now they’re back for seconds? https://t.co/SkfPJyneUz

— Jesse Powell (@jespow) November 21, 2023

The executive did not mince words, venting anger at “another assault on America”.

“Masochists are unhappy with the beatings they were subjected to in New York, and want to get a new counter in California. I thought we had settled all the problems for $30m in February [about a “unregistered” staking program],” — he wrote.

Powell commented on the SEC’s new charges. The regulator intends to obtain a ban on Kraken from operating as an exchange, broker, dealer or clearinghouse without the requisite license.

Powell saw in the suit a signal to Kraken and other crypto firms to exit the jurisdiction to avoid costly litigation.

“For $30m you get about 10 months before the SEC comes around to extort you again. Lawyers can do a lot with that sum, but the agency knows that a real fight will likely cost more than $100m and will take precious time. If you can’t afford it, leave the ‘combat zone’ in the United States,” he emphasised.

Message is clear: $30m buys you about 10 months before the SEC comes around to extort you again. Lawyers can do a lot with $30m but the SEC knows that a real fight will likely cost $100m+, and valuable time. If you can’t afford it, get your crypto company out of the US warzone.

— Jesse Powell (@jespow) November 21, 2023

In the new suit, the Commission also drew attention to the platform’s independent auditor’s statement, which acknowledged a “significant risk of losses” of customer funds.

The regulator added to the list a number of tokens he deemed unregistered investment contracts, including Algorand (ALGO), MATIC and NEAR. According to the suit, Kraken was directly involved in promoting these assets.

“We strongly disagree with the SEC’s allegations, and firmly believe that we do not list securities in our listings and will defend our position,” said Kraken chief David Ripley.

The executive lamented the absence of a clear registration mechanism at the agency for crypto-industry participants and condemned attempts at “an improper way of policymaking.”

Ripley pledged to support efforts to create regulatory transparency and noted Congress’s priority on the matter.

In March 2023 the FBI conducted a search of Powell’s home as part of a criminal investigation into allegations of hacking the nonprofit he founded.

In autumn 2022 he stepped down as CEO of the platform, becoming chairman of the board.

Earlier in May 2022, SEC chair Gary Gensler signalled possible enforcement against unregistered crypto exchanges. He had previously identified them as a primary focus in tightening oversight of the industry.

Since March 2023 the agency has initiated civil proceedings against Beaxy, Bittrex, Binance and Coinbase.

In September, Gensler said that intermediaries operating in the market such as brokers, dealers or clearinghouses require registration with the Commission.