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Crypto Exchange Kraken Accuses Etana of $25 Million Custody Fraud

Payward, the parent company of Kraken, has filed a lawsuit claiming that former custody partner Etana misappropriated over $25 million in client funds.

The suit alleges that Etana operated a “Ponzi-like” scheme where custodial assets were misused and falsely reported.

Kraken entrusted Etana with hundreds of millions as part of a fiat on-ramp partnership, only to face difficulties withdrawing approximately $25 million in reserves in April 2025.

The complaint highlights that Etana stalled the withdrawal with fabricated reconciliation issues and misleading information.

Kraken's litigation head declared that they will pursue justice relentlessly against individuals or firms that deceive them or compromise their clients’ funds.

Etana is going through Chapter 11 bankruptcy proceedings and has not responded to requests for comments regarding the allegations.

This incident emphasizes the significant counterparty risks in the crypto industry, as firms often operate without the same regulations that govern traditional finance.

High-profile failures, including those from FTX, highlight the rapid loss of trust when customer assets are not properly secured.

Currently, Kraken is seeking damages exceeding $25 million, along with additional claims for treble damages and legal fees.

This legal action underscores a growing concern in the cryptocurrency sector about the safety and management of customer assets amidst ongoing liquidity issues within the market.