Kraken Parent Payward Sues Custody Firm Etana Over Alleged $25 Million Fraud
Payward, the parent company of cryptocurrency exchange Kraken, filed a lawsuit on May 4 accusing custody firm Etana and its chief executive of orchestrating a $25 million fraud that the complaint describes as a “Ponzi-like” scheme. Payward alleges that client funds were misused, commingled with other assets, and concealed until a liquidity crisis forced the arrangement into the open.
The case represents one of the largest custody fraud allegations in the cryptocurrency industry since the collapse of FTX in late 2022.
What the Lawsuit Alleges
According to a CoinDesk report published May 4, Payward’s complaint accuses Etana of taking client funds that were supposed to be held in segregated custody and directing those funds toward other uses. Custody, in the context of cryptocurrency exchanges, refers to the practice of holding client assets in controlled accounts, separate from operating capital, under a legal obligation to return them on demand.
Payward says Etana violated that obligation, misrepresenting the status of the funds until the firm’s liquidity position deteriorated. The lawsuit names both the company and its CEO as defendants.
Also Read: US-Iran Hormuz Crisis Sends Oil to $115 as Strikes Exchanged
Background
The relationship between exchanges and third-party custody providers has drawn regulatory scrutiny since the FTX collapse exposed how customer funds can be redirected within interconnected entities.
Etana had operated as a banking and custody partner for several cryptocurrency platforms, with Kraken among its listed clients. The dispute follows a broader pattern of liquidity-driven custody failures that regulators in the US and Europe have sought to address through stricter segregation requirements.
Separate from this case, Kraken itself reached a settlement with the SEC in late 2023 over its staking program. The exchange has since expanded its product suite and operates one of the largest US-facing spot markets for digital assets.
Also Read: Circle and Coinbase Stocks Rally as Stablecoin Bill Compromise Lifts Sector
What Comes Next
Etana has not issued a public response to the lawsuit as of May 4.
The case will move through the civil court system, with the first procedural steps likely involving a response filing from the defendants within 30 to 60 days of service. The outcome matters for the cryptocurrency custody industry broadly.
If Payward’s allegations are proven, the case would add momentum to regulatory calls for mandatory proof-of-reserves auditing and real-time monitoring of custodied client assets. Any settlement terms or injunctive relief sought by Payward will be disclosed in subsequent court filings.
Read Next: What RWA Tokenization Actually Means In 2026
