Kraken’s parent company, Payward, has won a $22 million arbitration award against former auditor Mazars USA after the accounting firm abruptly abandoned a nearly finished audit — a rupture Payward says was driven by industry-wide pressure during the post‑FTX crackdown known as “Operation Choke Point 2.0.”
What happened
- Payward asked the Delaware Court of Chancery to enter final judgment on the $22 million award after a panel found in the company’s favor, the crypto exchange said in a blog post and an open letter from co‑CEO Arjun Sethi.
- Mazars had audited Kraken for three years and issued two clean opinions, but withdrew from the third audit days before completion in December 2023. According to Sethi, Mazars confirmed in writing that it had no disagreement with Kraken management, no concerns about the company’s integrity, and had found no fraud — yet still quit, citing legal uncertainty.
- The arbitration award is intended to compensate Payward for reputational and financial harm, including years of legal fees, that Sethi tied to the coordinated campaign to cut crypto firms off from banks, auditors and other services.
Why Payward links this to “Choke Point 2.0”
- Sethi described the withdrawal as part of a broader pattern of industry pressure. He noted that Mazars Group had already stopped proof‑of‑reserves work for the entire crypto sector in December 2022.
- He invoked regulators’ January 3, 2023 joint statement from the Federal Reserve, FDIC and OCC warning banks about crypto risks, plus at least 25 FDIC “pause letters” sent to 24 banks that critics say urged lenders to halt or avoid crypto activity.
- The term “Operation Choke Point 2.0” is widely used by critics to describe what they view as the Biden administration’s unofficial campaign to encourage banks and service providers to exit the crypto industry after the collapse of FTX. Much of that guidance has since been rolled back and officials are reportedly probing wrongful debanking.
Legal and political aftermath
- Kraken was among dozens of crypto firms sued or investigated by the SEC during that period. The SEC’s suit against Kraken was dismissed with prejudice in March 2025, with no penalties or admission of wrongdoing.
- Sethi used the arbitration win and open letter to press for legislative change, urging support for the Clarity Act — a bill that would split digital‑asset oversight between the SEC and the CFTC. The Clarity Act cleared the House earlier and the Senate Banking Committee in a 15‑9 vote in May, but it still needs a full Senate vote and reconciliation with a companion measure.
Personal fallout and company leadership
- Sethi said the fallout extended beyond audits. He recounted that Kraken co‑founder and former CEO Jesse Powell had his home raided by federal agents in March 2023 in an unrelated nonprofit dispute; that probe closed roughly two years later with no charges and the return of Powell’s devices.
- Powell has ceded day‑to‑day control to Dave Ripley; Sethi later joined Ripley as co‑CEO. Ripley tweeted that Kraken will enter the $22 million award as compensation for damage from the campaign to sever crypto from essential services.
Why it matters
- The arbitration award sets a precedent for holding professional firms accountable when they abruptly cut ties with crypto clients, and it underscores the industry’s call for clearer legal and regulatory rules.
- For crypto firms, the case highlights how non‑legal judgments by banks, auditors or service providers can inflict long‑lasting reputational and financial harm — and why many in the industry argue that changing the regulatory framework is essential to restore ordinary access to banking and professional services.
Bottom line
Kraken’s $22 million award is both a financial win and a political statement: Payward is pressing not just for compensation, but for systemic reform to prevent auditors, banks and other service providers from abandoning legitimate crypto businesses without clear legal cause. The power struggle over how digital assets are regulated — and which institutions can safely provide services to them — continues to shape the sector’s recovery.
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