Kraken’s Parent Files $25 Million Fraud Lawsuit Against Custody Partner Etana
Payward, the parent company of cryptocurrency exchange Kraken, filed a $25 million fraud lawsuit against custody services firm Etana and Etana’s CEO on May 4, alleging that client funds were misused, commingled, and concealed in what Payward’s filing describes as a “Ponzi-like” scheme. The case was first reported by CoinDesk.
Payward said the alleged fraud unraveled amid a liquidity crisis at Etana that left client assets at risk.
The Allegations Against Etana
Payward’s complaint alleges that Etana took customer funds entrusted to it for custody purposes and commingled those assets in a manner that concealed their true status from clients and from Kraken. The filing uses the phrase “Ponzi-like” to describe how the scheme allegedly masked shortfalls.
Payward did not release the full complaint text in the announcement reviewed by Nonce Media. The $25 million figure represents the damages Payward is seeking.
Etana and its CEO had not issued a public response as of Monday afternoon.
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What Etana Does
Etana is a custody and financial services firm that works with cryptocurrency exchanges and institutional clients to hold and process customer assets. Cryptocurrency custody, the practice of safeguarding digital assets on behalf of clients, has become a critical and regulated function in the industry following a series of high-profile failures at firms that allegedly commingled client and company funds.
Custody providers are distinct from exchanges in that their primary obligation is safekeeping rather than trading.
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Background
The lawsuit follows a pattern of custody-related disputes that accelerated after the collapse of FTX in late 2022, which exposed widespread commingling of customer funds at a major exchange. Regulatory scrutiny of custody practices has intensified since then, with the SEC and CFTC both expanding their examination of how cryptocurrency firms handle client assets.
Payward has not previously disclosed a public dispute with Etana, making Monday’s filing the first public indication of a breakdown in the relationship between the two companies.
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Outlook
The case will test how courts treat custody agreements in the cryptocurrency sector, where contract terms and regulatory obligations are still developing. If Payward prevails, the precedent could push cryptocurrency exchanges to tighten due-diligence requirements on third-party custody partners.
Etana’s response to the complaint will determine whether the dispute moves toward settlement or a full trial. Kraken has not said whether the alleged shortfall affected any specific group of users or trading activity on the platform.
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