Payward, the parent company of the cryptocurrency exchange Kraken, has filed a lawsuit against its former partner, Etana, and the company's CEO, 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 the company's own 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 lawsuit claims 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 not stop until justice is served. 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, the cryptocurrency market has 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 faced by cryptocurrency users and the need for greater transparency and regulation in the industry.