Kraken Sues PowerTrade Over Missing $7 Million in Crypto
Kraken says PowerTrade funneled millions in digital assets and profits through unauthorized transactions. The case is moving through the U.S. and the DIFC in Dubai.
Key Takeaways
- Kraken parent company Payward is suing PowerTrade over the alleged misappropriation of about $7.2 million in digital assets and unrealized profits.
- Kraken says PowerTrade took more than $6 million through unauthorized transactions and turned a positive balance into a negative one.
- Kraken got a worldwide freezing order in Dubai and also started legal action in other jurisdictions.
Payward, the parent company of crypto exchange Kraken, has filed a lawsuit against PowerTrade, a crypto derivatives platform based in the United Arab Emirates. According to the complaint, PowerTrade's founders misappropriated about $7.2 million in digital assets and unrealized profits from Kraken.
Unauthorized Transactions and Negative Balance
Kraken says PowerTrade improperly took more than $6 million from Payward's PowerTrade account through a series of one-sided transactions. In the process, profitable trades that had already been closed or settled months earlier were allegedly canceled after the fact. That caused the positive balance of about $7 million to be turned into a negative balance of $2 million. According to the complaint, this was an attempt to artificially push Payward's trading account into the red and misappropriate Payward's collateral.
Legal Actions and Asset Freeze
Payward has filed a request with a federal court in the United States to get information from several U.S. financial institutions about PowerTrade and its founders. In addition, Kraken obtained a provisional worldwide freezing order through the courts of the Dubai International Financial Centre (DIFC) against PowerTrade and its founders. Legal proceedings have also been started in other jurisdictions.
Context Around PowerTrade as a Derivatives Platform
PowerTrade was founded in 2019 and offers trading in more than 100 crypto options and perpetual markets, including well-known cryptos like Bitcoin and Ethereum. The platform is known for features like zero trading fees on perpetual contracts and leverage of up to 1000x on options. PowerTrade presents itself as a centralized exchange that wants to give professional traders institutional tools. This background highlights the importance of transparency and security on platforms like this, especially given the size of Kraken's claims.
The case fits into a broader trend of major platforms expanding their derivatives offerings. For example, Coinbase is also expanding its business with new trading products to become less dependent on traditional spot volume.
Relevance for European Crypto Investors
This case highlights the risks tied to using derivatives platforms, even ones with a professional image and high leverage options. European investors can take away that strong oversight and legal safeguards are still crucial to prevent losses from abuse or fraud. It also underscores the importance of doing careful due diligence when choosing trading platforms for complex crypto products.
