Payward, the parent company of the Kraken cryptocurrency exchange, has filed a lawsuit against its former custody partner, Etana, and its CEO, Dion Brandon Russell, alleging that they misappropriated over $25 million in client funds. According to the complaint, Etana operated a Ponzi-like scheme where custodial assets were mixed with other funds, used for operational expenses and risky investments, and falsely reported to clients as intact.
Kraken had entrusted Etana with hundreds of millions of dollars as part of a partnership, but when it tried to withdraw $25 million in reserve funds in April 2025, Etana allegedly stalled and provided misleading explanations. The complaint claims that Etana relied on new deposits to cover shortfalls and lacked the funds to meet the withdrawal request.
Kraken's head of litigation, Matt Turetzky, stated that the company will pursue justice and hold those responsible accountable. Etana did not respond to requests for comment. The case highlights the issue of counterparty risk in the cryptocurrency market, where users rely on exchanges, lenders, and custodians to safeguard their funds.
Unlike traditional finance, cryptocurrency platforms often operate with looser controls, making it harder to verify whether assets are fully backed. 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, plus potential treble damages and attorneys' fees. The complaint also targets Russell personally, alleging that he directed the misuse and concealment of funds.