Kraken and Custodia Bank CEOs Say The SEC Ignored Their Warnings• February 21, 2023 3:18 pm • Comments
Recently, the track record of the SEC has not been good as the agency has failed to protect many retail investors from scams and frauds which is the purpose of the agency in the first place.
Both the CEOs of Kraken and Custodia Bank had commented on this and shared that they themselves had also tried to warn the SEC about multiple scams.
However, it seems that the SEC had ignored their warnings which inevitably led to millions of customers losing their investments and created a negative impact on the rest of the crypto industry.
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Jesse Powell, CEO of Kraken, had mentioned that it was quite disappointing to see the SEC to ignore serious red flags in the industry such as the collapse of FTX while the agency wasted resources on targeting legitimate crypto businesses.
Custodia Bank CEO Caitlin Long also shared the same sentiments about the SEC has been targeting the wrong players.
I have a theory:
Regulators let the bad guys get big and blow up because it serves their agenda.
1. destroy capital/resources in crypto ecosystem
2. burn people, deter adoption
3. give air cover to attack good actors
The bad guys are actually on-side. Good guys are the enemy. https://t.co/DZI2O8gVyO
— Jesse Powell (@jespow) February 19, 2023
Powell and Long expressed their discontent at their firms being used as an example of fraud when they have tried to do the right thing all along.
Long said Custodia Bank was slammed on multiple fronts when the White House attacked the Federal Reserve Board of Governors, the Kansas City Fed, and Senator Dick Durbin. Last month, the Federal Reserve Board denied Custodia Bank’s application to become a member of the Federal Reserve System.
In a senate speech, Long claims that senator Durbin “implicitly” compared her and Fidelity CEO Abigail Johnson with FTX founder Sam Bankman-Fried. Fidelity irked regulators last year when it announced that it would allow customers to invest part of their pension investments in Bitcoin.
Long added in a blog post:
“Custodia tried to become federally regulated – the very result bipartisan policymakers claim to want. Yet Custodia has been denied and now disparaged for daring to come through the front door. “
Ultimately, these actions by the SEC will negatively effect the regulatory environment for crypto within the US and will make many firms think twice about doing business in the region.
Investors are concerned that this will drive more firms to move offshore which will basically drive capital and talent outside of the country.
Since the fall of FTX last year, the amount of enforcement actions by the SEC has also skyrocketed, but it is unclear on whether or not these actions will actually benefit the industry.
Instead, it seems to just make it harder to do business which is why the community believes that clear regulation is needed now more than ever.
Actual frauds must be targeted instead of legitimate firms like Custodia Bank and Ripple in order to regain investor confidence.
If the bad guys can run long enough without blowing up, they might just kill the good guys for you.
Bad guys operate with huge competitive advantages. They suck up users, revenue and venture capital that would otherwise have gone to good guys.
BG can always be jailed later.
— Jesse Powell (@jespow) February 19, 2023
Powell’s statement followed Kraken reaching an agreement with the SEC, in which the crypto firm agreed to stop offering staking services or programs to U.S. clients and pay $30 million in disgorgement, prejudgement interest and civil penalties.
Many in the crypto space have criticized the SEC’s actions as another example of “regulation by enforcement” — a criticism extended to the regulator cracking down on celebrities endorsing tokens through social media channels.
In September 2022, Powell announced he would be succeeded as CEO by Kraken’s chief operating officer, Dave Ripley, after which time he would stay with the crypto firm as the chair of the board.
Paxos was also reportedly facing enforcement action from the SEC for allegedly violating investor protection laws in dealing with Binance USD stablecoins.
Former Kraken #CEO Vents At SEC Over Regulations😤😤
The former CEO of Kraken, Jesse Powell, explains the reasons why the #SEC may be acting against the favour of the entire #financial sector. He reasonably stated facts you may want to read 👇#Cryptohttps://t.co/7j4YyPgX5m pic.twitter.com/5VHnRmlheU
— Cryptonautilus (@Cryptonautiluss) February 21, 2023
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