Kraken sues Etana Custody over $25M loss, alleges ‘Ponzi-like’ misuse of client funds

Crypto exchange Kraken has filed a federal lawsuit against Etana Custody and its CEO, alleging that the firm misused customer funds and failed to return millions of dollars held on behalf of the exchange.

The complaint, filed in the U.S. District Court for the District of Colorado on 4 May, claims Kraken entrusted Etana with hundreds of millions of dollars in custodial assets. 

According to the filing, at least $25 million remains unaccounted for following what Kraken describes as years of mismanagement and misleading disclosures.

Kraken alleges misuse of funds and delayed withdrawals

According to the complaint, Etana commingled client funds and failed to maintain proper tracking systems for individual accounts. 

Kraken claims the firm used customer assets to fund operating expenses and high-risk investments instead of safeguarding them under custody agreements.

The filing states that Etana continued to provide account statements showing intact balances, even as funds were allegedly being depleted. Kraken argues that these statements created a false impression of financial stability.

The dispute intensified in April 2025 when Kraken requested a full withdrawal of its funds. Etana delayed the request, citing a prolonged “reconciliation” process.

Kraken later learnt that significant discrepancies existed and that funds may not have been available.

The complaint also links losses to external investments, including failed promissory note deals, as well as internal spending. Kraken argues these actions breached contractual and fiduciary obligations.

Regulatory intervention and liquidation

Etana’s financial position worsened as regulatory pressure increased. According to the filing, Colorado authorities intervened in 2025 and placed the firm into liquidation. A court-appointed receiver now oversees the remaining assets and recovery process.

Kraken alleges that Etana relied on incoming funds to meet obligations, describing the setup as a “Ponzi-like enterprise.” The characterization comes from Kraken’s complaint and has not been independently verified.

The exchange is seeking damages, recovery of funds, and additional relief tied to alleged fraud, breach of contract, and conversion.

Final Summary

• Kraken has filed a federal lawsuit alleging Etana Custody misused at least $25 million in client funds and failed to return assets on request.
• The case highlights ongoing risks in crypto custody infrastructure, particularly around fund segregation, transparency, and regulatory oversight.