Payward, the parent company of the Kraken cryptocurrency exchange, has filed a lawsuit against its former 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, combining custodial assets, using them for operational expenses and risky investments, and then falsely reporting them 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 tried to withdraw $25 million in reserve funds in April 2025, Etana allegedly stalled, citing fabricated reconciliation issues and misleading explanations. The lawsuit claims that Etana lacked the funds to meet the withdrawal request and relied on new deposits to cover the shortfall.
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 a request 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, where segregation, insurance, and oversight are more standardized, cryptocurrency platforms have historically operated with looser controls, making it harder to verify whether assets are fully backed.
The lawsuit outlines several alleged 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. Kraken is seeking at least $25 million in damages, plus potential treble damages under civil theft claims, injunctive relief, and attorneys' fees.