Payward, the parent company of the Kraken cryptocurrency exchange, has filed a lawsuit against Etana, its former custody partner, and the company's CEO, Dion Brandon Russell, alleging a $25 million cryptocurrency custody scam. According to the lawsuit, Etana operated a 'Ponzi-like' scheme in which it commingled, spent, and concealed client assets, while falsely reporting them as secure to clients.
Kraken had entrusted Etana with hundreds of millions of dollars as part of a fiat on-ramp partnership but claims that when it tried to withdraw $25 million in reserve funds in April 2025, Etana stalled and provided misleading explanations. The lawsuit alleges that Etana relied on new deposits to cover shortfalls and lacked the funds to meet withdrawal requests.
Kraken's head of litigation, Matt Turetzky, stated that the company will pursue justice for the alleged deception and misuse of client funds. Etana is currently undergoing a court-supervised liquidation in Colorado and has not responded to requests for comment.
The case highlights the issue of counterparty risk in the cryptocurrency market, where users often rely on exchanges, lenders, and custodians to safeguard their funds. The lawsuit against Etana is the latest example of the risks associated with cryptocurrency custody and the need for stricter controls and oversight. Kraken is seeking at least $25 million in damages, as well as potential treble damages and injunctive relief.
The complaint also targets Russell personally, alleging that he directed the misuse and concealment of funds.