Payward, the parent company of the cryptocurrency exchange Kraken, has filed a lawsuit against its former custody partner Etana and the company's CEO, Dion Brandon Russell, alleging the misappropriation of over $25 million in client funds. According to the complaint filed in the U.S. District Court in Colorado, Etana operated a 'Ponzi-like' scheme in which it commingled and spent custodial assets on operational expenses and risky investments, while falsely reporting the funds as intact to clients. Kraken had entrusted Etana with hundreds of millions of dollars over several years as part of a partnership, but when it attempted to withdraw approximately $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 due to a lack of funds to meet the withdrawal request. Kraken's head of litigation, Matt Turetzky, stated that the company will pursue justice for the alleged deception of its customers. Etana has not responded to requests for comment. The lawsuit highlights the issue of counterparty risk in cryptocurrency markets, where users rely on exchanges, lenders, and custodians to safeguard their funds.
Unlike traditional finance, cryptocurrency platforms have historically operated with less stringent controls, making it challenging to verify whether assets are fully backed. The case against Etana underscores concerns about whether customer funds are truly secure or exposed to operational and liquidity risks. Kraken, a U.S.-based cryptocurrency exchange, offers spot and derivatives trading, custody, and staking services to both retail and institutional clients globally.
The lawsuit alleges several instances of misuse, including the deployment of at least $16 million of Kraken-related funds into promissory notes that later defaulted, and the use of customer assets to finance a foreign-exchange hedging strategy. Throughout this period, Etana allegedly continued to issue account statements and dashboard updates that showed customer balances as secure, despite internal shortfalls.
Kraken is seeking at least $25 million in damages, plus potential treble damages and injunctive relief. The complaint also targets Russell personally, alleging that he directed the misuse and concealment of funds.