Judge Denies Kraken Appeal as SEC Lawsuit on Crypto Trading Proceeds

Highlights:

• Judge rejects Kraken appeal as SEC lawsuit continues over unregistered crypto trading.  
• Kraken claims on investment contracts dismissed with discovery to decide compliance.  
• BIT Mining pays $14M in penalties for bribery and corruption charges.  

A California judge has rejected Kraken’s request to appeal a ruling in the ongoing SEC lawsuit. On Nov. 18, Judge William Orrick dismissed Kraken’s motion for interlocutory appeal. He said allowing the appeal would simply delay the outcome of the case.  

The SEC sued Kraken in 2023, accusing it of operating as an unregistered exchange, broker, dealer, and clearing house. The lawsuit alleged that cryptocurrencies traded on Kraken’s platform qualify as investment contracts under the Howey Test. 

#Kraken faces a legal setback as a federal #judge denies its request to #appeal the #SEC #lawsuit.

The #case, which challenges whether Kraken’s offerings qualify as #investment contracts under the #Howeytest, now moves to discovery.

What's bound to happen next? Share your… pic.twitter.com/WmzSHKahma

— Unlock Blockchain (@unlockbc) November 19, 2024

Judge Orrick agreed, ruling that the SEC plausibly alleged securities violations. He emphasized that further discovery is needed to determine whether Kraken’s conduct fully meets the Howey test.  

Kraken had argued that it was necessary to appeal to settle unresolved legal questions about investment contracts. The company claimed a formal contract or post-sale obligations should be required under securities laws. However, Orrick disagreed, saying that no court has interpreted the Howey Test to require the formalities.  

SEC Argues Kraken’s Practices Violate Investment Contract Laws

Kraken’s appeal was opposed by the SEC, which asserted that the prolongation of the litigation was unnecessary. The agency argued that existing laws plainly outline what constitutes investment contracts. They contend that Kraken was provided fair notice of what compliance requirements are. It also asked the court to ignore three of Kraken’s three defenses, saying they would be irrelevant and burdensome.  

Judge Orrick rejected Kraken’s position, finding that it contradicted legal precedents. Other courts had examined similar issues and rejected Kraken’s arguments, he pointed out. He also claimed certifying the appeal would impede, not facilitate, the case’s progress. Kraken has denied any wrongdoing and said its operations were consistent with all applicable laws.

The ruling comes in the wake of a change to a crypto-friendly administration. Analysts are predicting that the SEC will experience big changes, with the current chair expected to resign before Trump’s inauguration. The crypto community hopes that the incoming administration will end the ongoing cases and adopt crypto-friendly policies.

BIT Mining Settles Bribery Charges with SEC and DOJ

In related news, the SEC has announced that BIT Mining has agreed to settle charges of violating the Foreign Corrupt Practices Act (FCPA). The company engaged in a bribery scheme targeting Japanese officials from 2017 to 2019. BIT Mining sought to gain approval for a casino project in Japan.  

📄 The U.S. SEC announced on Monday that crypto mining company BIT Mining Ltd. has agreed to pay a $4 million fine to settle allegations of bribing Japanese officials.

🏛️ The SEC stated that between 2017 and 2019, BIT Mining paid $2.5 million in cash bribes and gifts to Japanese…

— BTC World (@BTC_WorldEN) November 19, 2024

According to the SEC, BIT Mining funded $2.5 million in illicit payments. They included cash bribes, entertainment, and luxury trips for officials. They argue that a senior executive at the company approved the bribes.  

In the settlement, BIT Mining agreed to pay a civil penalty of $4 million and follow SEC compliance rules. The company also reached a deferred prosecution agreement with the U.S. Department of Justice. BIT Mining will pay an additional $10 million criminal fine, partially offset by the SEC penalty. The SEC pointed out that strong controls should be in place within an organization to avoid such violations.