Kraken wins $22M as Arjun Sethi blasts Operation Chokepoint 2.0

Kraken has secured a $22 million arbitration award against its former auditor Mazars USA, with co-CEO Arjun Sethi linking the dispute to what he described as Operation Chokepoint 2.0.

According to a letter published Tuesday by Kraken co-CEO Arjun Sethi, parent company Payward has asked the Delaware Court of Chancery to enter judgment on the arbitration award after prevailing against Mazars USA. The dispute centers on the firm’s withdrawal from Kraken’s nearly completed 2022 audit, which Sethi said caused financial damage to the exchange.

Sethi wrote that Mazars ended the engagement despite finding no fraud, raising no concerns about Kraken’s management and reporting no disagreements with the company. He argued that the decision disrupted access to banking relationships, licensing processes and other essential business services that rely on completed independent audits.

Describing audits as critical infrastructure for financial companies, Sethi wrote that “an audit is not a favor. It is oxygen,” while arguing that lawful crypto firms were denied access to basic financial services during the period.

Sethi ties audit dispute to regulatory pressure

In the letter, Sethi attributed Mazars’ withdrawal to Operation Chokepoint 2.0, a term used by parts of the crypto industry to describe alleged coordinated pressure on banks, auditors and service providers to distance themselves from digital asset companies.

To support that argument, the letter pointed to several regulatory developments during 2023. These included joint guidance issued by U.S. banking regulators, the Securities and Exchange Commission’s since-rescinded Staff Accounting Bulletin No. 121, and the collapse of crypto-focused banking networks Silvergate SEN and Signature Bank’s Signet payment system.

Sethi also urged Congress to pass the CLARITY Act, saying a dedicated crypto market structure law would provide clearer operating rules for digital asset companies instead of relying on enforcement actions.

Offering his own reaction on X, Kraken co-CEO Dave Ripley said the arbitration case represented only part of what happened during that period. Ripley described the $22 million award as compensation for financial harm that he said resulted from a coordinated campaign against the crypto industry.

Meanwhile, U.S. regulators have continued reviewing banking oversight tied to digital assets. In February, the Federal Reserve requested public feedback on a proposal to remove “reputation risk” from bank supervision after its 2025 directive instructing supervisors to stop pressuring banks to close customer accounts over reputational concerns. Critics of the previous framework argued the proposal could help end practices associated with Operation Chokepoint 2.0.

Kraken expands products while IPO plans continue

Even as the legal dispute moves through the Delaware court, Kraken has continued adding new institutional and trading products.

As previously reported by crypto.news, the exchange recently began allowing eligible users outside the United States to use selected tokenized stocks and exchange-traded funds as collateral for futures and margin trading on Kraken Pro.

The launch covers 10 xStocks assets, including SPYx, QQQx, AAPLx, GOOGLx, TSLAx, NVDAx, HOODx, MSTRx, GLDx and CRCLx, allowing traders to back leveraged crypto positions without selling those holdings.

The collateral initiative follows other recent product launches. In May, Payward partnered with Franklin Templeton to introduce tokenized money market products for collateral and cash management on Kraken. A month later, Kraken and Maple launched an institutional crypto lending structure using a bankruptcy-remote vehicle for crypto-backed loans.

Founded in 2011, Kraken has also been preparing for a public listing. The company disclosed in November 2025 that it had confidentially submitted a draft Form S-1 registration statement to the U.S. Securities and Exchange Commission.

However, reports published in May said the IPO may be delayed until 2027 because of weaker crypto market conditions and ongoing cost-cutting efforts.