Kraken parent company Payward announced that it has won an arbitration case against former auditor Mazars USA, with the arbitration tribunal ordering Mazars to pay approximately $22 million in damages. Payward has filed a petition with the Delaware Court of Chancery to confirm the arbitration result, converting the arbitration award into a formal court judgment.
Background of the Arbitration Case: The Events and Scope of Losses Following Mazars' Termination of Audit Cooperation in 2022
According to the case details released by Payward, the incident originated in 2022: Mazars abruptly terminated cooperation just as Kraken’s annual financial audit was nearing completion, and throughout the entire audit process, no fraud, management integrity issues, or material objections to the financial statements were identified. Payward stated that this sudden termination negatively impacted the company’s subsequent efforts to obtain regulatory licenses, maintain banking relationships, and conduct general business operations.
The arbitration tribunal ultimately determined that Mazars should bear responsibility for part of the losses suffered by Payward, ordering compensation of $22 million. Kraken co-CEO Dave Ripley stated that this compensation represents partial recovery of the financial losses the company incurred due to changes in the external environment.
CEO Sethi’s Statement on Operation Choke Point 2.0: Direct Link Between Regulatory Pressure and Auditor Withdrawal
Payward co-CEO Arjun Sethi issued a statement after the arbitration victory, noting that the timing of Mazars’ termination of cooperation closely overlapped with the US regulatory environment toward the crypto industry following the collapse of FTX. He referenced what the industry calls "Operation Choke Point 2.0" — a situation in which banks, auditors, and other financial service providers have distanced themselves from crypto companies against this backdrop, making it more difficult for many legitimate businesses to access basic financial services.
Sethi stated that independent audit reports are a critical foundation for companies to obtain banking services, apply for licenses, and establish business partnerships. When auditors terminate cooperation without raising material issues, it not only forces companies to seek new auditors but can also delay regulatory processes, increase operational costs, and affect external trust in the company.
Kraken’s Subsequent Legal Actions and Global Business Expansion Plans
Following the arbitration victory, Payward has filed a petition with the Delaware Court of Chancery to confirm the arbitration result, completing the subsequent legal process to convert the arbitration award into a formal court judgment. At the same time, Kraken continues to push forward with global business expansion:
Tokenized Stocks and Institutional Lending: Actively laying out new product lines
European Banking License: Evaluating the possibility of applying for a European banking license
US IPO Plans: Continuing to advance its US listing plan to further expand its footprint in traditional financial markets
Kraken believes this arbitration case has become one of the few significant instances in recent years where a crypto company has won such a case, reflecting that companies can still protect their rights through legal channels when facing unilateral contract terminations.
Frequently Asked Questions
What were Payward’s main allegations in the arbitration case, and what was the final ruling?
According to the content released by Payward, the main allegation was that Mazars abruptly terminated cooperation as Kraken’s 2022 annual financial audit was nearing completion, without identifying any fraud or material financial issues. This move affected Kraken in applying for licenses, maintaining banking relationships, and general operations. The arbitration tribunal ruled that Mazars should bear responsibility for some of the losses, ordering compensation of approximately $22 million. Payward has filed a petition with the Delaware Court of Chancery to confirm the ruling.
What is Operation Choke Point 2.0, and what impact does it have on the crypto industry?
According to Sethi’s statement, Operation Choke Point 2.0 is a term used by the industry to describe the US regulatory environment following the collapse of FTX, referring to banks, auditors, and other financial service providers distancing themselves from crypto companies against this backdrop, making it more difficult for legitimate crypto companies to access basic financial services (such as bank accounts and audit services). The above is Sethi’s personal interpretation; official announcements should be referred to for regulatory policy developments.
What are Kraken’s current global business expansion plans?
According to reports, Kraken has recently been actively laying out new products such as tokenized stocks and institutional lending, evaluating the possibility of applying for a European banking license, and continuing to plan its US IPO. Specific plan progress and timelines are subject to official announcements from Kraken.
