San Francisco-based cryptocurrency exchange Kraken is facing allegations from the U.S. Securities and Exchange Commission (SEC) for operating without proper registration as a securities business.

This move follows similar actions taken against Coinbase and Binance.
In a lawsuit filed on Monday, the SEC claims that Kraken commingled customer and corporate funds, violating federal securities laws.

The regulator emphasizes the risk created by Kraken, alleging that up to $33 billion in customer crypto was mixed with the company’s own assets. The lawsuit reveals that Kraken has at times held over $5 billion of customer cash and used these funds for operational expenses.

The SEC’s accusations mirror those against Binance and Coinbase earlier this year. Tokens such as Algorand (ALGO), Polygon’s MATIC, and NEAR are listed as unregistered securities in the filing, with Kraken accused of actively promoting these to the public.

Kraken’s co-founder, Jesse Powell, strongly criticized the Securities and Exchange Commission (SEC) for suing his crypto exchange over alleged violations of securities laws. Kraken vehemently denies the SEC’s claims, asserting that it does not list securities and plans to defend its position vigorously.

Powell, in a post on X (formerly Twitter) on November 21, referred to the SEC as the “USA’s top decel,” a term in tech circles to criticize someone hindering progress. He suggested that the SEC wasn’t content with the $30 million settlement Kraken paid in February.

Powell’s message advised other crypto companies to avoid costly legal battles by steering clear of what he referred to as “the US warzone.”

The SEC’s legal action seeks a permanent ban on Kraken from operating as an unregistered exchange, along with fines and restitution of ill-gotten gains.