Kraken Intensifies Legal Fight: Seeks Final Judgment in $22M Auditor Case

Payward, the parent company behind the prominent cryptocurrency exchange Kraken, has formally requested the Delaware Court of Chancery to issue a final judgment against its former auditor, Mazars USA. This request follows an arbitrator's decision to award Payward a substantial $22 million. Kraken publicly disclosed this development on July 7, through an open letter penned by co-CEO Arjun Sethi and a series of social media posts from CEO Dave Ripley. The origins of this dispute trace back to December 2023, when Mazars abruptly withdrew from auditing Kraken's 2022 financial statements, mere days before the audit's scheduled completion. Prior to this, Mazars had served as Kraken's auditor for three consecutive years, providing two clean opinions. According to Sethi, Mazars had confirmed in writing that it held no disagreements with Kraken's management, harbored no concerns regarding the firm's integrity, and found no evidence of fraud. Mazars attributed its resignation to evolving legal landscape, specifically citing a complaint that the Securities and Exchange Commission (SEC) had filed against Kraken weeks earlier. Notably, that particular SEC complaint was subsequently dismissed with prejudice, without any penalties imposed on Kraken or an admission of wrongdoing.

Kraken asserts that the abandoned audit resulted in significant financial and operational setbacks, costing the company years and millions of dollars in legal fees. These expenses were incurred to secure new auditors and to reassure various stakeholders, including banks, regulators, and counterparties. Since the departure of Mazars, Kraken has successfully obtained a clean audit for each subsequent year. This legal victory and ongoing dispute unfold as Kraken actively pursues a full European banking license, reportedly through Lithuania. Securing this license would enable the company to extend traditional banking services across the European Economic Area (EEA), potentially making it the first cryptocurrency exchange to achieve such a comprehensive European banking authorization, as highlighted by CoinDesk reporting. This strategic move aligns with Kraken's broader regulatory approach, as it expands its offerings beyond core crypto services into mainstream financial sectors, building upon existing milestones like U.S. Federal Reserve payment access and authorization in the UAE.

Co-CEO Arjun Sethi contextualized the Mazars episode within what critics term "Operation Chokepoint 2.0." This phrase describes a perceived coordinated campaign by regulators aimed at severing lawful cryptocurrency firms from essential banking and other financial services. Preceding its withdrawal from the Kraken audit by a year, in December 2022, Mazars Group had already ceased all proof-of-reserves work for the entire crypto sector and removed its existing reports from its website. Sethi's letter detailed a series of actions from 2022 and 2023 that exemplified this alleged operation. On January 3, 2023, the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) collectively issued a joint statement. This statement warned that various crypto business models presented significant safety and soundness concerns for banks. Furthermore, documents released through a Freedom of Information Act lawsuit revealed that the FDIC dispatched at least 25 letters to two dozen banks, strongly urging them to either suspend or refrain from expanding their crypto-related activities. The SEC's Staff Accounting Bulletin (SAB 121) accounting guidance mandated that public companies holding crypto assets record them directly on their balance sheets, a requirement that rendered crypto custody economically unviable for many banks. Concurrently, the Federal Reserve denied a master account application from Custodia, a Wyoming-chartered bank specifically designed for digital assets. Adding to the pressure, in March 2023, the payment networks operated by Silvergate and Signature banks both shut down within days of each other, further constraining the crypto industry's access to banking infrastructure.

However, much of the regulatory framework associated with this "debanking era" has since been dismantled. The SEC ultimately rescinded SAB 121, and the banking regulators collectively withdrew their contentious joint statement. A subsequent report by a House committee concluded that regulators had indeed employed vague rules and informal pressure tactics to dissuade banks from engaging with legitimate digital asset firms. Sethi also shared the personal experience of Kraken founder Jesse Powell. In March 2023, federal agents conducted a raid on Powell's home and confiscated his devices in connection with a dispute involving a nonprofit organization entirely unrelated to Kraken. After a two-year investigation, the government closed the case, returned Powell's devices, and brought no charges. Following this, Powell transitioned the chief executive role to Ripley, with Sethi joining Ripley in co-leading the company.

The open letter concluded with a fervent appeal for Congress to enact the CLARITY Act. This proposed legislation aims to establish comprehensive market-structure rules for digital assets, clearly delineating oversight responsibilities between the Commodity Futures Trading Commission (CFTC) and the SEC, while also incorporating new protections for software developers. The House of Representatives successfully passed the bill in July 2025 by a significant vote of 294 to 134, garnering support from 78 Democrats. The Senate Banking Committee also advanced its own version of the bill in May. Sethi drew a contrast between the slower U.S. regulatory timeline and the European Union, where the comprehensive MiCA (Markets in Crypto-Assets) framework has already taken effect across its member states, providing a clearer and more unified regulatory environment.