Kraken's parent company, Payward, is suing custodian Etana for allegedly misappropriating $25 million and operating a "Ponzi scheme."

Payward Inc. (Kraken's parent company) has filed a lawsuit in Colorado court, accusing former escrow partner Etana Custody and its CEO Dion Brandon Russell of misappropriating over $25 million in client funds and allegedly operating a Ponzi scheme. The lawsuit alleges that Etana commingled escrow assets for operating expenses and high-risk investments, filling funding gaps with new capital while continuously providing clients with false reports that their funds were "in good condition." Kraken stated that when it attempted to withdraw approximately $25 million in funds in April 2025, it encountered delays, with Etana refusing to pay citing "reconciliation issues." Furthermore, Etana is accused of investing at least $16 million of client funds in defaulted bills and using some assets for foreign exchange hedging while retaining returns. These funds remain unreturned. Etana is currently in Chapter 11 bankruptcy proceedings and under court receivership. Payward is seeking at least $25 million in damages and may pursue treble damages and other legal remedies. This incident once again highlights the counterparty risk issue in the crypto industry's custody process, namely, whether client assets are truly segregated and securely held, which remains a key focus of the market. (CoinDesk)