The United States Securities and Exchange Commission (SEC) remains active in the cryptocurrency sector. It has accused Kraken, one of the most popular crypto exchanges for U.S.-based residents, of running an unregistered securities trading platform.

The SEC alleges Kraken ran an unregistered securities exchange, broker, dealer, and clearing agency, earning hundreds of millions of dollars “unlawfully facilitating the buying and selling of crypto asset securities.”

The SEC also accused Kraken of commingling customers’ funds with its own. According to the agency, Kraken held up to $5 billion of customers’ cash in bank accounts and paid operational expenses from these accounts. The exchange also allegedly mixed up to $33bn of customers’ crypto assets with its own assets, risking losses.

• The SEC’s lawsuit hinges on cryptocurrencies like Bitcoin (BTC), Ethereum (ETH), Tether (USDT) and the like being securities. U.S. Congress hasn’t passed a firm law classifying cryptocurrencies as securities, but the SEC asserts they meet the legal definition of securities and has filed numerous lawsuits based on its rationale.

• The charge of mixing customers’ and corporate funds is noteworthy, given the risks of such funds being misappropriated, like in the FTX case.

Kraken is the latest entry to a long list of crypto exchanges the SEC has sued for many alleged offences. The agency previously sued Binance, the world’s biggest crypto exchange, and Coinbase, the biggest U.S. crypto exchange, for operating unregistered securities trading platforms. Bittrex paid a $24mn fine to settle similar charges this August.

This case isn’t Kraken’s first brush with the SEC. The crypto exchange previously paid $30mn to settle charges of failing to register its crypto-staking program as an investment offering. Staking refers to locking cryptocurrencies for a specific period to support a blockchain’s operations and earning more tokens as a reward. Kraken stopped offering this service after the settlement.

• The SEC is seeking monetary penalties and injunctions against Kraken. The crypto exchange can decide to settle or head to trial and defend itself before a federal judge. The former seems more likely to happen.

• “Today’s news…has no impact on the products we offer and we will continue to provide our services to our clients without interruption,” Kraken said in a statement.

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