Payward, the parent company of the Kraken cryptocurrency exchange, has filed a lawsuit against its former custody partner Etana and the company's CEO, Dion Brandon Russell, alleging that they misappropriated over $25 million in client funds. According to the complaint, Etana operated a scheme in which it commingled, spent, and falsely reported custodial assets to clients. Kraken had entrusted Etana with hundreds of millions of dollars as part of a fiat on-ramp partnership, but when it tried to withdraw $25 million in reserve funds in April 2025, Etana allegedly stalled and provided misleading explanations. The lawsuit 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. The case highlights the issue of counterparty risk in the crypto market, where users rely on exchanges, lenders, and custodians to safeguard their funds.
Unlike traditional finance, crypto platforms have historically operated 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 crypto custody and the need for stricter controls and regulations. Kraken is seeking at least $25 million in damages, as well as potential treble damages and injunctive relief.