Kraken's parent company sues former custody partner Etana, accusing it of misappropriating over $25 million in client funds

According to CoinDesk, Kraken's parent company Payward submitted a second amended complaint to the U.S. District Court for the District of Colorado, suing former custody partner Etana Custody and its CEO Dion Brandon Russell, accusing them of misappropriating over $25 million in customer funds and operating a "Ponzi scheme."

Payward claims that Etana mixed custodial assets with its own funds to pay for operational expenses and high-risk investments, and covered up the funding gap with false account reports.

In April 2025, when Kraken attempted to withdraw about $25 million in reserve funds, Etana delayed the process citing false reconciliation issues and relied on new deposits to fill the gap. Among these, at least $16 million was invested in a promissory note from Seabury Trade Capital, which later defaulted.

Colorado regulators subsequently issued a cease and desist order against Etana, which entered liquidation proceedings in November 2025 and is currently managed by a court-appointed receiver. Kraken is seeking at least $25 million in damages and triple civil theft damages.