Payward, the parent company of cryptocurrency exchange Kraken, has filed a lawsuit against its former custody partner Etana and the firm's CEO, Dion Brandon Russell, alleging the misappropriation of over $25 million in client funds. The lawsuit, filed in the U.S.
District Court in Colorado, claims that Etana operated a 'Ponzi-like' scheme, where custodial assets were combined, 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 partnership, but when it attempted to withdraw approximately $25 million in reserve funds in April 2025, Etana allegedly stalled, citing fabricated reconciliation issues and misleading explanations. According to the complaint, 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 a request 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 often operate with looser controls, making it difficult 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, 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 showing customer balances as secure and fully accounted for, despite internal shortfalls.
Kraken is seeking at least $25 million in damages, as well as potential treble damages under civil theft claims, plus 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.