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Kraken Wins $22 Million Arbitration; Sethi Pushes for Crypto Rules

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Kraken Wins $22 Million Arbitration; Sethi Pushes for Crypto Rules

2026-07-09 04:30 UTCBy AlphaScala Research DeskSource reporting: BitcoinEditorial standards

Kraken Wins $22 Million Arbitration; Sethi Pushes for Crypto Rules

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Kraken's parent Payward wins $22M arbitration award against auditor Mazars. Co-CEO Sethi calls for CLARITY Act to end debanking.

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Payward, Kraken's parent company, has asked the Delaware Court of Chancery to enter final judgment against Mazars USA after an arbitrator awarded the exchange operator $22 million.

The dispute began when Mazars pulled out of Kraken's nearly completed 2022 audit in December 2023. According to Payward Co-CEO Arjun Sethi, Mazars had audited Kraken for three years and issued two clean opinions. The auditor was days away from completing a third. Sethi said Mazars confirmed in writing that it did not disagree with Kraken's management, had no concerns about the company's integrity, and had no findings of fraud.

"An audit is not a favor. It is oxygen," Sethi wrote. "Banking relationships, licenses, counterparties, and regulators all depend on it."

Mazars cited legal uncertainty, including a Securities and Exchange Commission complaint against Kraken. That case was later dismissed with prejudice. Kraken paid no penalties and admitted no wrongdoing. The dismissal included no required changes to its business.

Sethi argued that Mazars' departure was not an isolated commercial decision. He described it as part of what critics have called Operation Chokepoint 2.0, a period of informal pressure on banks, auditors and service providers working with lawful crypto firms. He pointed to Mazars Group's December 2022 decision to halt proof-of-reserves work for the sector and remove related reports from its website. He said the firm was not walking away from weak clients. Instead, it was walking away from an industry that had become politically costly to serve.

"I will say what I believe plainly: Mazars was pressured," Sethi wrote.

His post also cited actions by U.S. regulators in 2023. The Federal Reserve, FDIC and OCC issued a joint statement warning banks about crypto-related risks. Documents later released through a Freedom of Information Act lawsuit showed the FDIC sent at least 25 letters to 24 banks urging them to pause or avoid expanding crypto activity. Sethi pointed to the SEC's SAB 121 accounting guidance and the Federal Reserve's denial of Custodia's master account. He also cited the shutdown of Silvergate's SEN and Signature's Signet settlement networks.

Much of that regulatory posture has since been reversed. SAB 121 was rescinded. The banking regulators withdrew their joint statement. Congressional investigations found that regulators used vague rules and informal pressure to steer banks away from digital asset firms.

Sethi said the damage was not limited to companies. He described being personally debanked and said portfolio companies at Tribe Capital lost banking relationships despite doing nothing wrong. He also cited Kraken founder Jesse Powell, whose home was raided in 2023 over a nonprofit-related dispute. The investigation was later closed with no charges.

The $22 million award covers Kraken's damages from Mazars' withdrawal. The opportunity cost of a delayed IPO, lost banking relationships and stalled license applications is far larger. Clear federal legislation would define digital asset classification, establish a federal registration path for exchanges and custodians, and prohibit regulators from using informal guidance to pressure banks away from lawful clients. The CLARITY Act is the most concrete proposal on the table. If it passes, the cost of compliance becomes predictable. Auditors and banks would have a clear legal framework to assess risk. Continued regulatory fragmentation, by contrast, would keep the cycle of ad hoc pressure alive. If the SEC and CFTC do not resolve their jurisdictional overlap, or if a new administration reverses the current posture, another wave of debanking could push more liquidity and talent offshore.

Sethi's blogpost ends with a call for Congress to pass the CLARITY Act. "We won this fight," he wrote. "Now, our congressional leaders from both sides of the aisle need to come together to finish the bigger one. Pass the CLARITY Act."