Summary
- Payward, the parent company of Kraken, was awarded $22 million by an arbitrator after suing its former auditor, Mazars USA, for abandoning an almost completed audit, as stated in a blog post by the exchange.
- Co-CEO Arjun Sethi mentioned that Mazars withdrew due to legal ambiguities surrounding the SEC's ultimately dismissed case against Kraken, alleging the firm faced pressure to leave the industry.
- Payward is now requesting the Delaware Court of Chancery to finalize the judgment on the awarded amount, with Sethi leveraging this situation to advocate for the Clarity Act's passage.
Kraken's parent company, Payward, has been granted a $22 million arbitration award against its previous auditor, Mazars USA, which exited from a nearly finalized audit, as reported in a blog entry on Tuesday.
Payward is seeking a final judgment from the Delaware Court of Chancery on this award, as outlined in an open letter from co-CEO Arjun Sethi, who also called for reforms in U.S. cryptocurrency regulations. The company took legal action against Mazars for abandoning the audit, which Sethi claims inflicted reputational damage during the peak of what is referred to as Operation Choke Point 2.0.
It’s been a while since we discussed Choke Point 2.0.
Kraken will file for a $22 million award with the Delaware Court of Chancery — compensation for financial harm inflicted on us by the coordinated campaign to cut crypto off from banking, auditors, and other essential services. pic.twitter.com/gJoJ5ytU07
— Dave Ripley (@DavidLRipley) July 7, 2026
Sethi emphasized, "An audit is not a favor. It is oxygen," arguing that relationships with banks, licenses, and regulatory bodies are contingent upon it. He noted that when an auditor departs without any findings, the client is left to mend reputational damage that was not their fault, incurring years of costs and legal fees in the process.
The Incomplete Audit
Mazars had been conducting audits of Kraken's financials for three years, providing two clean opinions, before withdrawing from the third audit just days before its completion in December 2023, according to Sethi. He stated that Mazars had confirmed in writing that there were no disagreements with management, no concerns regarding the company's integrity, and that they found no evidence of fraud.
Sethi indicated that Mazars cited legal uncertainties as the reason for its withdrawal, including a complaint previously filed by the SEC against Kraken. He alleged that the auditor had been pressured to exit an industry that had become politically risky, highlighting that Mazars Group had ceased its proof-of-reserves work across the entire crypto sector in December 2022.
Operation Choke Point 2.0
Operation Choke Point 2.0 refers to what critics describe as the Biden administration's unofficial initiative to urge banks to sever ties with the crypto industry following the collapse of FTX. This term recalls a similar program from the Obama era that pressured banks to drop businesses like payday lenders and firearms dealers.
Sethi pointed to a joint statement issued on January 3, 2023, by the Federal Reserve, FDIC, and OCC, cautioning banks about the risks associated with crypto, as well as FDIC "pause letters" sent to at least 24 banks, which advocates argue indicated banks should halt or delay crypto-related activities. Around the same period, the SEC, under then-chair Gary Gensler, was suing or investigating numerous crypto firms, including Kraken.
SEC's Case Against Kraken
The SEC's lawsuit against Kraken was dismissed with prejudice in March 2025, resulting in no penalties or admission of wrongdoing, marking a broader retreat after Gensler's departure and a shift in the administration's stance. Operation Choke Point 2.0 has largely been dismantled, with previous guidance being reversed and officials now reviewing wrongful debanking cases.
Sethi asserted that the repercussions extended beyond the audit. He mentioned that Kraken co-founder and former CEO Jesse Powell experienced a federal raid on his home in March 2023 due to an unrelated dispute with a nonprofit, which concluded about two years later without any charges and with Powell's devices returned. Powell has since passed day-to-day leadership to Dave Ripley, with Sethi later joining as co-CEO.
An Appeal for Clarity
Sethi utilized the letter to advocate for the Clarity Act, a legislative proposal aimed at establishing a clear regulatory framework for digital assets by allocating oversight responsibilities between the SEC and the CFTC. He contended that demonstrating compliance as a legitimate crypto business should not necessitate engaging in legal battles.
The bill passed the Senate Banking Committee with a 15-9 vote in May, following its approval in the House the previous year, but has stalled ahead of the July 4 recess and still requires a full Senate vote and reconciliation with a related measure before it can reach the president's desk.