Kraken’s parent company Payward has been awarded $22 million in arbitration against former auditor Mazars USA after the firm abruptly abandoned a nearly complete audit in December 2023, the exchange said Tuesday. Payward is asking the Delaware Court of Chancery to enter final judgment on the award, and co-CEO Arjun Sethi used an accompanying open letter to call for a broad overhaul of U.S. crypto rules.
Why the award matters
Payward argued that Mazars’ sudden withdrawal — after three years of auditing Kraken and two prior clean opinions — inflicted severe reputational and financial damage at a sensitive moment for the industry. “An audit is not a favor. It is oxygen,” Sethi wrote, noting that banks, regulators and licensing bodies depend on audited financials. When an auditor walks away with no published findings, the client is left to repair damage it didn’t earn, at the cost of years and millions in legal fees.
What Mazars said — and what Payward alleges
Mazars confirmed in writing that it had no disagreement with management, no concerns about Kraken’s integrity, and had found no fraud before pulling out days before the third audit’s completion. The firm cited “legal uncertainty,” including an SEC complaint filed against Kraken weeks earlier, as the reason for withdrawing. Payward contends Mazars was pressured to abandon the crypto sector as the business became politically fraught — pointing out that Mazars Group had already stopped proof-of-reserves work for all crypto firms in December 2022.
Operation Choke Point 2.0 — the wider context
Payward frames the fallout as part of what critics call “Operation Choke Point 2.0,” an informal campaign that pressured banks and other service providers to cut ties with crypto firms after FTX’s collapse. Support for that characterization rests on several developments:
- On Jan. 3, 2023, the Federal Reserve, FDIC and OCC issued a joint statement warning banks about crypto risks.
- The FDIC reportedly sent at least 25 “pause letters” to 24 banks, which advocates say discouraged crypto activity.
- The SEC, under then-chair Gary Gensler, sued or investigated numerous crypto companies, including Kraken.
Many of those enforcement tactics have since been dialed back. The SEC’s suit against Kraken was dismissed with prejudice in March 2025 with no penalties or admission of wrongdoing. Regulators have rolled back some earlier guidance, and officials are now probing wrongful debanking.
Other fallout for Kraken leadership
Sethi also highlighted collateral consequences beyond the audit. In March 2023 federal agents raided co-founder and former CEO Jesse Powell’s home in connection with a dispute involving a nonprofit unrelated to Kraken; the probe was closed about two years later with no charges and Powell’s devices returned. Powell moved off day-to-day leadership, handing operational control to Dave Ripley; Sethi later became co-CEO.
Policy push: the Clarity Act
Sethi used the arbitration win to press for the Clarity Act, a market-structure bill that would split oversight of digital assets between the SEC and the CFTC and make it easier for legitimate crypto businesses to obtain banking and professional services without prolonged legal fights. The bill passed the House last year and cleared the Senate Banking Committee 15–9 in May, but it stalled before the July recess. It still needs a full Senate vote and reconciliation with a companion measure before becoming law.
What’s next
Payward is moving to convert the arbitration award into a final court judgment. Beyond the immediate payoff, the case underscores the industry’s vulnerability when auditors, banks and other gatekeepers retreat under regulatory or political pressure. Kraken’s leadership is framing the ruling as both financial vindication and a call to fix the regulatory uncertainty that, they say, allowed such disruptions to occur.
Expect continued attention on the Delaware court filing, any related appeals, and the trajectory of the Clarity Act as lawmakers wrestle with how to restore normal banking and professional services to crypto firms.
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