Payward, the parent company of cryptocurrency exchange Kraken, has filed a lawsuit against former custody partner Etana and its CEO, Dion Brandon Russell, alleging the misappropriation of over $25 million in client funds. According to the complaint, Etana operated a 'Ponzi-like' scheme where custodial assets were commingled, used for operational expenses and risky investments, and falsely reported to clients as intact. Kraken had entrusted Etana with hundreds of millions of dollars over several years as part of a fiat on-ramp partnership.
However, when Kraken attempted to withdraw approximately $25 million in reserve funds in April 2025, Etana allegedly stalled, citing fabricated reconciliation issues and misleading explanations. The complaint claims that Etana lacked the necessary funds to meet the withdrawal request and instead relied on new deposits to cover shortfalls. Kraken's head of litigation, Matt Turetzky, stated that the company will pursue justice, saying, 'If you take our money or deceive our customers, then know this: we will find you, we will sue you, and we will not stop until justice has been served.' Etana did not respond to requests for comment. The case highlights the issue of counterparty risk in crypto markets, where users rely on exchanges, lenders, and custodians to safeguard funds.
Unlike traditional finance, crypto platforms have historically operated with looser controls, making it harder to verify whether assets are fully backed. The lawsuit outlines several instances of alleged misuse, including the deployment of at least $16 million of Kraken-related funds into promissory notes that later defaulted.
Kraken is seeking at least $25 million in damages, plus potential treble damages under civil theft claims, injunctive relief, and attorneys' fees. The complaint also targets Russell personally, alleging that he exercised near-total control over Etana's operations and directed the misuse and concealment of funds.