- Kraken’s parent company, Payward, has filed a second amended complaint in Colorado federal court accusing former custody partner Etana Custody and its CEO of misappropriating more than $25 million in client funds.
- The suit alleges Etana ran a “Ponzi scheme” by commingling custodial assets with its own, funding expenses and risky bets, and papering over a growing hole with falsified account statements.
- Colorado regulators have already hit Etana with a cease-and-desist order; the firm entered liquidation in November 2025 and is now controlled by a court‑appointed receiver.
Kraken, the cryptocurrency exchange, has filed an updated lawsuit in Colorado federal court alleging that Etana Custody and its CEO, Dion Brandon Russell, along with others, stole more than $25 million belonging to Kraken customers.
Payward details alleged funding gap and “Ponzi-like” structure
Payward claims Etana ran a Ponzi scheme, improperly combining funds it was holding for Kraken with its own money. Etana allegedly used these combined funds to cover expenses and make risky investments, while falsely reporting complete account balances despite a growing shortfall.
The lawsuit claims the issues began escalating in April 2025 when Kraken tried to take out around $25 million from its reserve funds.
Etana reportedly delayed payments by claiming there were accounting problems, which Payward insists were made up. They allegedly covered the shortfall with money from new customers – a practice Kraken describes as similar to how Ponzi schemes work, where new funds are used to pay off earlier investors.
The documents show that at least $16 million of the missing funds came from a loan made by Seabury Trade Capital. This loan went unpaid, and as a result, Etana couldn’t fulfill customer requests to withdraw their money unless it received new funds.
Regulatory collapse and Kraken’s damages claim
Etana’s troubles did not stop at private litigation.
As a researcher following this case, I can report that Colorado regulators took action against Etana Custody Inc. by issuing a cease-and-desist order. Later, on November 7, 2025, a Denver County court stepped in and appointed a liquidator to take control of the company’s assets as part of a formal liquidation process.
As a crypto investor, I’ve been following the Etana situation closely, and the latest updates from the receivership website are pretty clear: things are completely stalled. It’s no longer up to Etana to manage things; a court is now in charge of handling all claims from customers like me and other parties they worked with. Basically, everything is frozen while the legal process plays out.
Payward is requesting at least $25 million in damages to cover funds they claim Etana didn’t return. They’re also seeking additional damages – potentially tripling the amount to over $75 million – based on Colorado’s theft laws, not including any legal fees or interest.
The lawsuit claims Etana violated its contract, failed to act in its clients’ best interests, committed fraud, and provided inaccurate information. Specifically, it alleges that Etana presented itself as a secure custodian, protected from bankruptcy, while actually using client funds for risky and unstable investments through Kraken.
A recent article in crypto.news discussed a legal case that could set a precedent for how courts handle crypto custodians who mix customer funds, particularly if those custodians are already facing liquidation by state regulators.
A recent crypto.news report examined the Etana receivership, highlighting that companies like Kraken, along with regular customers and other creditors, must now wait in line to reclaim their assets from the failed custodian.
According to crypto.news, Payward has significantly increased the stakes in its legal dispute, now accusing the other party of operating a “Ponzi scheme.” This new claim could lead to greater investigation and oversight of how similar crypto custody services operate.
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2026-05-04 22:06