The crypto community, including prominent industry lawyers and U.S. Senator Cynthia Lummis, is sounding off about the new lawsuit filed by the U.S. SEC against cryptocurrency exchange Kraken.
Kraken Co-Founder Jesse Powell Under Federal Investigation on Claims of Hacking, Cyberstalking Non-Profit
The agency searched the Los Angeles home of Jesse Powell as it probes whether he had interfered with computer accounts of the non-profit. A lawyer for Powell said he’s done “nothing wrong” and that the matter does not touch on his crypto interests.
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According to Jesse Powell, U.S. regulators allowing bad actors in the crypto space to “suck up users, revenue and venture capital” could effectively destroy “the good guys”.
Binance proof-of-reserves is ‘pointless without liabilities’: Kraken CEO
According to Powell, a complete proof-of-reserve audit must include the sum of client liabilities, user-verifiable cryptographic proof that each account was included in the sum and signatures proving the custodian’s control over the wallets.
Kraken’s Jesse Powell Blast FTX And Sam Bankman-Fried Without Naming Them
Leave it to Jesse Powell to say what everyone in crypto is thinking. “I’m really trying to control my rage,” the mind behind Kraken tweeted to begin his rant. In the following article, we’ll comment on several of his very interesting points. Make no mistake, though, Jesse Powell thinks this isn’t over and the crypto industry will have to work for years to make up for… some other cryptocurrency exchange’s mistake. “More business failures are sure to come as the contagion spreads,” he warned.
2/ Our good, trusting nature makes us easy targets for con artists. Some even tell us straight up that they're here for profits, not crypto, and we praise them for their honesty.
Yet we're surprised when they turn out to be who they said they are. We need to raise our standards.
— Jesse Powell (@jespow) November 10, 2022
At one point, Powell even gave the best advice possible for future crypto investors. “Don’t trust. Verify.”
What he didn’t do, though, was naming Sam Bankman-Fried, FTX, or Alameda Research. We are assuming this is all about them, but it’s just an assumption.
Jesse Powell Allegedly Blast Sam Bankman-Fried
First of all, the head of Kraken doesn’t buy the “I made a mistake” line that Sam Bankman-Fried has been feeding the public via Twitter. And Powell doesn’t mince words while saying he doesn’t.
“This isn’t about aiming high and missing. This is about recklessness, greed, self-interest, hubris, sociopathic behavior that causes a person to risk all the hard-won progress this industry has earned over a decade, for their own personal gain.”
The thing is, Sam Bankman-Fried didn’t only blow up his two billion-dollar businesses. He blew up the whole crypto industry. “We give them power to speak for us but they haven’t earned that privilege. When they blow themselves up, it’s our house, our reputation, our people which bear the brunt of the damage,” Powell tweeted. And he’s probably right about this. Everyone will have to pay for Bankman-Fried’s mistakes.
5/ The damage here is huge. An exchange implosion of this magnitude is a gift to #bitcoin haters all over the world. It's the excuse they were waiting for to justify whatever attack they've been keeping in their back pocket.
We're going to be working to undo this for years.
— Jesse Powell (@jespow) November 10, 2022
Then, in a bizarre turn of events, Jesse Powell brought bitcoin into the mix:
“An exchange implosion of this magnitude is a gift to bitcoin haters all over the world. It’s the excuse they were waiting for to justify whatever attack they’ve been keeping in their back pocket.”
What does the FTX implosion have to do with bitcoin? In fact, out of all the crypto world, bitcoiners are the less affected by all of this. In bitcoin culture, the self-custody of your assets is paramount. And people who make the effort and self-custody aren’t directly affected by exchanges blowing up and losing their customer’s hard-earned money. They are affected by the price movements these black swan events generate, though.
FTT price chart for 11/10/2022 on Binance | Source: FTT/USD on TradingView.com
Are The Media, VCs, And The US Government To Blame?
This is the most interesting part of Jesse Powell’s rant. As bitcoiners denounced Sam Bankman-Fried’s shady business model left and right, the man became a media darling like few others. His frequent political donations, the way he said what the establishment wants to hear about crypto regulation, and the whole myth about him being an effective-altruism vegan were the perfect combination.
“VCs, the media, the “experts” failed. People torched their own reputations vouching for individuals, projects, businesses they had not diligenced.”
We’re pretty sure “diligenced” is not a word, but Jesse Powell’s message stands. The media failed miserably and led retail astray. They will never admit to their wrongdoings, but Sam Bankman-Fried was on the cover of “Fortune” a couple of weeks ago. “The New Warren Buffet?” was the article’s title.
9/ Red flags:* acting like you know everything after showing up to the battle 8 years late* 9 figs buying political favor* being overeager to please DC* huge ego purchases, like 9-fig sports deals* being a "media darling", seeking out puff pieces* EA virtue signaling* FTT
— Jesse Powell (@jespow) November 10, 2022
What about VCs, though? Aren’t they at least partially responsible for financing FTX? Before you answer, read what Jesse Powell has to say about it. He’s got inside information:
“I know for a fact that VCs wrote checks blindly. Why? Because revenues were strong. Were they sustainable? Were they bleeding out money the other side? Was it all predicated on an untenable self-dealing setup, frontrunning clients, misappropriation of user funds? Never asked.”
11/ US lawmakers & regulators have some accountability too. You drove this business offshore because you refused to provide a workable regime under which these services could be offered in a supervised manner. Enforcement wrongfully focuses on convenient, on-shore good actors.
— Jesse Powell (@jespow) November 10, 2022
Last but not least, what about the US Government and its lack of crypto regulation clarity?
“US lawmakers & regulators have some accountability too. You drove this business offshore because you refused to provide a workable regime under which these services could be offered in a supervised manner.”
Jesse Powell is not saying those institutions are as guilty as Sam Bankman-Fried allegedly is, but they really dropped the ball on this one. And, as it always happens, the people suffered.
Featured Image by Luke Jernejcic on Unsplash | Charts by TradingView
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Majority of the top 100 DeFi tokens had a mixed week, with several tokens trading in green on weekly charts, with the total value locked seeing a minor increase of $4 billion.
Kraken reiterates hiring targets as CEO denounces ‘woke activists’ in corporate culture
“We recognize that hurt feelings are inevitable in a global organization that is optimizing for team outcomes above individual sentiment,” said the team at Kraken.
Kraken CEO Says Bitcoin Below $40k Is A Buying Opportunity
Jesse Powell, the CEO of the popular crypto exchange Kraken, has said that Bitcoin under $40K would be a good buy, while also predicting that the dollar will go to zero.
Bitcoin’s Fall Is A Buying Opportunity
If the price of Bitcoin falls below $40,000, Kraken CEO Jesse Powell says the present downward pressure would provide another purchasing opportunity for investors.
The Kraken CEO discussed the crypto market in an interview with Bloomberg TV, revisiting his former prediction that BTC will climb to $100,000 by the end of the year.
“But I think a lot of people see anything under the $40,000 as a buying opportunity. I was personally buying when we dipped back to $30,000 a few months ago. A lot of people have some dry powder on the sidelines just waiting to come back in at rock-bottom prices.”
Bitcoin was expected to exceed $100,000 by the end of 2021, according to Jesse Powell. Despite the fact that he stated that there are still a few days left, at a press time price of $49,396, and given the present trend, a milestone as significant as the one promised is unlikely to occur.
Related article | Kraken Director Dan Held Tags Traditional Financial Institutions A “Cartel”
Long Term Investment If Dollar Falls
Powell acknowledged that his past predictions for Bitcoin may have been off the mark, but added that it’s difficult to foresee what will happen next in the market. However, he believes that anyone considering investing in Bitcoin should consider it as a “five-year plus investment.”
He also discussed Bitcoin’s more volatile nature, stating that this is more obvious on shorter time frames, with its price swinging dramatically in a day or over a week. He feels that the best method is to treat cryptocurrency as a “buy and hold” investment.
“Bitcoin is something I think about as a long-term investment because it’s difficult to predict short-term price moves,” said Powell. “It’s a speculative asset in many ways, but you can’t help but be impressed by how far it has come and the amount of innovation that’s happening around it.”
While Powell remains bullish on cryptocurrency, particularly Bitcoin, he paints a bleak picture for the US dollar. With interest rates expected to go negative and the dollar approaching “zero,” he believes the best option for investors is to avoid holding their currencies in the greenback.
Powell addressed the decade-long uncertainty in the US regulatory regime and the lack of a proper set of regulations in the sector. As a result, several companies have shifted their headquarters offshore in search of greener pastures, while others have remained on the sidelines, fearful of the implications.
Powell also discussed Kraken’s ambitions as the crypto industry grows in popularity, stating that the exchange wants to help combat disinformation that could harm new investors. Kraken is also planning to launch a non-fungible token (NFT) platform to capitalize on the growing interest in the field.
BTC price chart on Kraken | Source: BTC/USD on TradingView.com
Related Article | Did US Regulators Began Offensive Against Crypto Platforms? CFTC Fines Kraken
Featured Image from Pixabay – Charts by TradingView
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In August, the CEO predicted that Bitcoin would trade “$100,000 plus a coin” late this year or early next year.
Did US Regulators Began Offensive Against Crypto Platforms? CFTC Fines Kraken
One of the biggest cryptocurrency exchanges, Kraken, received a $1.25M fine. The Commodity Futures Trading Commission imposed the “civil monetary penalty” plus a cease and desist from “further violations of the Commodity Exchange Act (CEA)” on September 28th. According to the CFTC, Kraken provided margin for commodity transactions to retail clients in the U.S. who were not suitable to use those products.
Related Reading | How the CFTC fine on Coinbase could affect future crypto company listing
The fine, however, seems like a slap on the wrist for a gargantuan company like Kraken. They’re a private company and their annual revenue is not on the public domain, but they raised $100M at a $4B valuation in 2019. And, reportedly, Kraken was seeking a $20B valuation this year following an IPO that didn’t happen. For a company that size, a $1.25M fine is not much, but maybe the punishment just fits the violation.
ETH price chart on Kraken | Source: ETH/USD on TradingView.com
What Did Kraken Do Exactly?
The violation occurred between June 2020 and July 2021 approximately. During that period, “Kraken illegally operated as an unregistered FCM.” And, what did the unregistered futures commission merchant offer? Well, U.S. customers could acquire digital assets using margin, and Kraken provided said asset or the fiat money “to pay the seller for the asset.” Of course, users had to provide collateral and pay for the received asset within 28 days.
If they didn’t pay in the established period, “Kraken could unilaterally force the margin position to be liquidated.” They could also liquidate “if the value of the collateral dipped below a certain threshold percentage of the total outstanding margin.” In short, Kraken was selling derivatives and extending credit without registering as an FCM. “These transactions were unlawful because they were required to take place on a designated contract market and did not.”
The CFTC’s Acting Director of Enforcement, Vincent McGonagle, said in the press release:
“This action is part of the CFTC’s broader effort to protect U.S. customers. Margined, leveraged or financed digital asset trading offered to retail U.S. customers must occur on properly registered and regulated exchanges in accordance with all applicable laws and regulations.”
The Cryptocurrency Exchange’s Latests Plays
Over the last few months, Kraken representatives went hard on the traditional financial system. From their Director Dan Held calling the whole thing “a cartel,” to CEO Jesse Powell predicting that cryptocurrency companies would replace them within a decade. In Held’s tweet, he attached a graphic that showed how the consolidation of the US banking sector advanced through the years. Nowadays, just four institutions control it all:
The traditional banking system is a cartel.#Bitcoin fixes this. pic.twitter.com/LEFCTb6g93
— Dan Held (@danheld) July 1, 2021
Related Reading | Bitcoin Slides 5% From Recent Highs Amidst Binance CFTC Probe Revelation
For his part, the last day of March, Powell told Bloomberg:
“Most of these guys haven’t done the work these last ten years to make sure they are current with the crypto technology. So I think there’s a very real risk that over the next ten years, for those legacy businesses to be simply replaced.”
In more recent news, Kraken is trying to re-enter the European market. The company was licensed to operate through the UK’s Financial Conduct Authority. Thus, since Brexit happened, they have to find a new home for their license. When NewsBTC covered the news, we said:
“Powell added that the Kraken exchange seeks to re-enter Europe by the end of 2021. It will go with the Republic of Ireland, Malta, and Luxembourg, among possible countries, to award such a license. However, they are yet to fix an official date as the talk still goes on.”
Will the $1.25M fine the CFTC imposed throw a wrench on those, or any of Kraken’s plans? Certainly not. Not by a long shot.
Featured Image by Erik Tanghe from Pixabay – Charts by TradingView
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