Crypto community responds to Kraken lawsuit, Deaton slams 'dishonorable' Gensler

The crypto community, including prominent industry lawyers and U.S. Senator Cynthia Lummis, is sounding off about the new lawsuit between the U.S. SEC against cryptocurrency exchange Kraken.

The crypto space has been making its feelings known about the latest blow from regulators in the United States, a lawsuit filed by the Securities and Exchange Commission (SEC) against crypto exchange Kraken. 

The lawsuit was filed on Nov. 20 based on the SEC’s allegations that Kraken has been operating as an unregistered exchange, broker, dealer and clearing agency and claiming that it is mixing customer assets with its own.

Since the news broke, the crypto community on social media, Kraken executives and prominent lawyers have been vocal in expressing their views on the SEC’s action. 

The day the news broke, Kraken founder Jesse Powell called the action an “assault on America” and named the SEC the U.S.’s “top decel.” Powell even warned other companies to depart from the U.S.

On Nov. 21, the current CEO of Kraken, Dave Ripley, took to X and said the company “strongly disagrees” with the SEC claims and plans to “vigorously” defend its position.

We strongly disagree with the SEC claims, stand firm in our view that we do not list securities, and plan to vigorously defend our position.

As we have seen before, the SEC argues that @krakenfx should “come in and register” with the agency, when there is no clear path to…

— Dave Ripley (@DavidLRipley) November 21, 2023

As an industry leader, we will stand up to these allegations and defend the crypto industry’s right to exist in the U.S.,” he said. Ripley said the “lack of regulatory clarity in the U.S.” will only be resolved by Congressional action. 

“[We] will continue to support these efforts to bring clarity and certainty to the chaotic environment that has been created in the U.S.”

Related: Kraken will share data of 42,000 users with IRS

Prominent crypto lawyer John Deaton also commented on the development, calling Gary Gensler, the current SEC chairman, a “despicable and dishonorable regulator.”

Deaton commented on Kraken’s decision in February to pay $30 million to the SEC in a settlement deal.

@GaryGensler is a despicable and dishonorable regulator. He knew that @krakenfx believed it was buying peace for the $30M. I know some people are critical of it’s choice to settle and pay the $30M. I wanted them to fight as well. But when you decide to fight, $30M takes you only… https://t.co/WeF4YTMfip

— John E Deaton (@JohnEDeaton1) November 21, 2023

He said he believes Gensler does not care about any of the parties involved – employees or investors- and ended by saying, “he’s a disgrace, and I can’t wait to see him go down.”

When asked if Kraken stands a chance against the SEC in court for round two, crypto criminal defense lawyer Carlo D’Angelo posted on X, formerly Twitter, that he doesn’t see the odds being in the SEC’s favor. 

“Similar arguments have been tried and failed in other circuits. The judge in the Kraken case will likely look closely at those decisions. Judges like consistent precedents—less chance of getting reversed on appeal.”

One user responded, “Just because the sec says something, [doesn’t] make it true! Get them to explain in detail to the court how to come on and register and operate normally.”

The SEC has received a lot of backlash for its harsh crackdown on crypto, particularly as the industry is operating in a legal system that has not yet provided clear legislation for cryptocurrencies and exchanges working with digital assets.

However, the crypto space does have allies on the regulatory side too. U.S. Senator Cynthia Lummis posted a response to the lawsuit saying the SEC cannot continue to “rule by enforcement.”

The SEC cannot continue ruling by enforcement. My statement on the Kraken lawsuit below: pic.twitter.com/J3qhzU624N

— Senator Cynthia Lummis (@SenLummis) November 21, 2023

She said crypto companies’ have made “repeated” attempts to receive guidance from the SEC but have seen no progress. House Representative Tom Emmer is also backing the industry, and recently proposed defunding the SEC’s crusade against crypto.

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