Kraken, a leading name in the crypto exchange domain, was recently imposed with a $1.25 million fine. This was after the Commodity Futures Trading Commission found the platform guilty of violating the Commodity Exchange Act.
The organization employed the “civil monetary penalty” from this act to punish the illicit actions of Kraken. Announced on 28th September 2021, CFTC stated that the platform was found taking a margin for commodity transactions. They then transferred this to their US-based retail clients that did not have a
suitable profile for such products.
However, this sum of money is only a fraction of the amount that a massive company- Kraken, can make. Being a private firm, the platform does not show its yearly revenue online. Although, it was observed that they raised $100 million for a $4B valuation back in 2019.
Why was Kraken fined?
According to the reports, Kraken was found functioning as an unauthorized FCM from 2020 June to 2021 July. This Futures Commission Merchant allowed its US-based users to trade digital assets by employing margin. However, in such cases, the customers had to put forth collateral.
They also had to make a payment for the acquired asset in 28 days. If the users were unable to do so, Kraken took the charge for liquidating the margin placement. In simple terms, the platform was trading derivatives and providing credit services without getting themselves accreditation as an FCM.
Vincent McGonagle, the Acting Director of Enforcement (CFTC), came forward to clarify that this step was taken to safeguard the US traders. He further encouraged the users to only opt for registered platforms for trading in digital assets.
