Kraken’s parent company, Payward, has filed a lawsuit accusing crypto custodian Etana and its CEO, Dion Brandon Russell, of embezzling more than $25 million in customer funds.
The complaint, filed in the U.S. District Court in Colorado, alleges that the losses arose after Etana failed to fulfill a withdrawal request and concealed the financial shortfall.
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Kraken said it entrusted Etana with hundreds of millions of dollars through a legal partnership over several years. In April 2025, the exchange attempted to withdraw about $25 million from reserve funds. According to the lawsuit, Etana delayed the process and cited reconciliation issues that Kraken now considers misleading.
Kraken She had a multi-year legal partnership with Etana CustodyThe company was entrusted with hundreds of millions of dollars in customer funds. Etana acted as a third party to facilitate transfers between Kraken and traditional banking systems.
Early Warning Signs By May 2025, problems began to emerge when customers began reporting issues with Etana withdrawals. Aetana met with representatives of the SEC’s Cryptocurrency Task Force in early May 2025 to discuss regulatory approaches for crypto assets, suggesting that the company was already facing compliance challenges.
But the complaint is as I mentioned CoinDeskstates that Etana did not have sufficient funds to meet the demand. Instead, the company allegedly relied on new deposits to cover existing gaps.
Payward alleges that Etana commingled customer funds and used them to cover operational expenses and investments. The lawsuit describes the setup as “Ponzi-like,” where incoming funds are used to offset past losses.
One example cited includes at least $16 million linked to Kraken that Etana allegedly invested in promissory notes from Seabury Trade Capital. The issuer later defaulted, and Kraken claims the funds were not returned.
Claims of confusion and losses
The complaint also alleges that Aetana used the client’s assets in a foreign exchange hedging strategy while retaining any gains. Despite these issues, Etana reportedly continued to show customers’ balances were completely healthy.
Regulatory pressures increased in 2025, when Colorado authorities issued a cease-and-desist order and raised capital requirements. Etana entered the court-supervised liquidation process in November 2025 and is now in receivership.
Continue reading: Kraken raises $200 million with app-based DeFi Yield staking
Kraken is now seeking at least $25 million in damages, plus additional penalties and legal costs. The case adds to ongoing concerns about how cryptocurrency companies manage and protect customer assets.
Meanwhile, Kraken’s DeFi Earn product has surpassed $200 million in depositsReflecting the growing demand for onchain proceeds that can be accessed directly through a central exchange application.
The offering enables users to earn dollar-denominated returns on their balances without transferring funds to external wallets or interacting with complex DeFi protocols, instead providing a streamlined, integrated experience within the Kraken platform.
Kraken’s parent company, Payward, has filed a lawsuit accusing crypto custodian Etana and its CEO, Dion Brandon Russell, of embezzling more than $25 million in customer funds.
The complaint, filed in the U.S. District Court in Colorado, alleges that the losses arose after Etana failed to fulfill a withdrawal request and concealed the financial shortfall.
Singapore Summit: Meet the top APAC brokers you know (and those you don’t know yet!)
Kraken said it entrusted Etana with hundreds of millions of dollars through a legal partnership over several years. In April 2025, the exchange attempted to withdraw about $25 million from reserve funds. According to the lawsuit, Etana delayed the process and cited reconciliation issues that Kraken now considers misleading.
Kraken She had a multi-year legal partnership with Etana CustodyThe company was entrusted with hundreds of millions of dollars in customer funds. Etana acted as a third party to facilitate transfers between Kraken and traditional banking systems.
Early Warning Signs By May 2025, problems began to emerge when customers began reporting issues with Etana withdrawals. Aetana met with representatives of the SEC’s Cryptocurrency Task Force in early May 2025 to discuss regulatory approaches for crypto assets, suggesting that the company was already facing compliance challenges.
But the complaint is as I mentioned CoinDeskstates that Etana did not have sufficient funds to meet the demand. Instead, the company allegedly relied on new deposits to cover existing gaps.
Payward alleges that Etana commingled customer funds and used them to cover operational expenses and investments. The lawsuit describes the setup as “Ponzi-like,” where incoming funds are used to offset past losses.
One example cited includes at least $16 million linked to Kraken that Etana allegedly invested in promissory notes from Seabury Trade Capital. The issuer later defaulted, and Kraken claims the funds were not returned.
Claims of confusion and losses
The complaint also alleges that Aetana used the client’s assets in a foreign exchange hedging strategy while retaining any gains. Despite these issues, Etana reportedly continued to show customers’ balances were completely healthy.
Regulatory pressures increased in 2025, when Colorado authorities issued a cease-and-desist order and raised capital requirements. Etana entered the court-supervised liquidation process in November 2025 and is now in receivership.
Continue reading: Kraken raises $200 million with app-based DeFi Yield staking
Kraken is now seeking at least $25 million in damages, plus additional penalties and legal costs. The case adds to ongoing concerns about how cryptocurrency companies manage and protect customer assets.
Meanwhile, Kraken’s DeFi Earn product has surpassed $200 million in depositsReflecting the growing demand for onchain proceeds that can be accessed directly through a central exchange application.
The offering enables users to earn dollar-denominated returns on their balances without transferring funds to external wallets or interacting with complex DeFi protocols, instead providing a streamlined, integrated experience within the Kraken platform.
