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Crypto Exchange Kraken Faces Major Legal Battle as Payward Sues Etana for $25 Million

Payward, the parent company of cryptocurrency exchange Kraken, has initiated a lawsuit against its crypto custodian, Etana Custody, claiming that Etana misappropriated over $25 million in client funds and operated a “Ponzi-like” scheme.

This dispute stems from a partnership established in 2018, with the intention of providing fiat on-ramp and off-ramp services.

The lawsuit reveals a critical incident in April 2025, when Kraken sought to withdraw $25 million, but Etana allegedly failed to fulfill this request.

Payward accuses Etana of misusing Kraken's customer reserves, mingling them with operational funds and employing risky hedging strategies, while projecting false security in account statements.

It is alleged that when internal deficiencies arose, Etana resorted to using new customer deposits to cover older debts, demonstrating a classic Ponzi scheme structure.

Kraken’s litigation head, Matt Turetzky, described the situation as “wild,” emphasizing the misleading practices employed by Etana.

He highlighted that while seeking restitution, Kraken received excuses instead of transparency, despite Etana’s legal counsel recommending full disclosure.

In light of these allegations, Turetzky reiterated Kraken’s commitment to achieving justice for its millions of users and substantial transaction volume.

While this legal saga unfolds, Payward has also announced the completion of acquiring Bitnomial, adding a US-regulated derivatives platform to its infrastructure.

The acquisition is expected to enhance Kraken's offerings in regulated spot margin, perpetuals, and options, marking a significant step forward for the exchange in the derivatives market.