Legal woes piling up for Bitcoin exchange Kraken

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Bitcoin exchange Kraken’s headaches are becoming a migraine as its legal woes continue to pile up. This week, the exchange is facing yet another lawsuit—this time from one of its former employees who accused Kraken of failing to pay his compensation.

A Bloomberg report identified the employee as Jonathan Silverman. According to the news outlet, Silverman joined the Kraken team in April 2017 to manage the exchange’s institutional sales and trading desk in New York. Silverman claimed Kraken founder Jesse Powell offered him a $150,000 salary as well as verbally agreed to give him a 10% commission of the trading desk’s annual profit and additional stock options.

According to Silverman, he reached an agreement with Kraken that they would pay him a lump sum settlement amounting to $907,631. In his lawsuit, filed last April 4 in New York, claimed Kraken “refused” to honor their agreement.

The New York trading desk is believed to have generated over $19 million in profits between September and December 2017, according to a separate suit filed by another employee, Robert Adler, against Kraken. Like Silverman, Adler also claimed that Kraken refused to pay the over $900,000 lump sum that was promised to him. Adler filed his lawsuit in September 2018, accusing the U.S.-based cryptocurrency exchange of breach of contract.

Unlike Adler’s lawsuit, Silverman’s allegations go beyond breach of contract. In his lawsuit, the former Kraken employee claimed the exchange had been “misrepresenting to the public and government regulators that it was not operating in New York; when in reality, Kraken’s OTC practice, and OTC trading (including logging into the Kraken exchange and negotiating wire transfers) occurred almost exclusively” in the state.

A spokesperson for Kraken, Christina Vee, was quoted by Bloomberg saying that Silverman “is both lying and in breach of his confidentiality agreement.”

Kraken exited New York in 2015, describing in a blog post the state’s BitLicense regime as “a creature so foul, so cruel that not even Kraken possesses the courage or strength to face its nasty, big, pointy teeth.”

Three years later, the New York Attorney General summoned the now California-headquartered exchange—along with several others—for an inquiry about their business practices and systems, specifically on the measures they have taken to protect their customers from market manipulations. Powell called the investigation “insulting.”

The exchange has spent the past year dealing with law enforcement authorities. Kraken said it responded to a total of 475 law enforcement inquiries in 2018, almost three times higher compared to the 160 inquiries it had to answer in 2017. In 2016, the company only received 71 inquiries.

That’s not the end of it. Kraken, along with Powell, is also named in a lawsuit filed by the United American Corp. (UAC) last year. UAC accused Kraken, along with BCH heavyweights Roger Ver, Bitmain and Bitcoin ABC developer Amaury Séchet, among others of conducting fraud and manipulating markets in connection with the November 2018 hard fork.