Kraken Wins $22M From Auditor That Abandoned It During Operation Choke Point 2.0

Kraken’s parent company, Payward, has won a $22 million arbitration award against its former auditor, Mazars USA, which walked away from a nearly finished audit, the crypto exchange said in a blog post on Tuesday.

Payward is now asking the Delaware Court of Chancery to enter final judgment on the award, in an open letter from co-CEO Arjun Sethi that doubled as a call to overhaul U.S. crypto rules. The company sued Mazars for abandoning the audit, which Sethi said caused reputational harm at the height of the so-called Operation Choke Point 2.0.

“An audit is not a favor. It is oxygen,” Sethi wrote, arguing that banking relationships, licenses and regulators all depend on one. When an auditor walks away without any findings, he said, the client is left repairing reputational damage it never earned, at a cost of years and millions in legal fees.

The abortive audit

Mazars had audited Kraken’s financials for three years and delivered two clean opinions, Sethi said, before quitting the third audit days before completion in December 2023. He said the firm confirmed in writing that it had no disagreement with management, no concerns about the company’s integrity, and had found no fraud.

According to Sethi, Mazars pointed to legal uncertainty when it withdrew, including a complaint the SEC had filed against Kraken weeks earlier. The co-CEO claimed that the auditor had in fact been pressured to abandon an industry that had become politically costly to serve, noting that Mazars Group had halted its proof-of-reserves work for the entire crypto sector in December 2022.

Operation Choke Point 2.0

Operation Choke Point 2.0 is a widely used term for what critics describe as the Biden administration’s unofficial campaign to pressure banks into cutting off the crypto industry after the collapse of FTX. It echoes an Obama-era program that leaned on banks to drop businesses such as payday lenders and firearms dealers.

Sethi pointed to a January 3, 2023 joint statement from the Federal Reserve, FDIC and OCC warning banks about the risks of crypto, and to FDIC “pause letters,” at least 25 of them sent to 24 banks, that advocates say told lenders to halt or hold off on crypto activity. Around the same time, the SEC under then-chair Gary Gensler was suing or investigating dozens of crypto firms, Kraken among them.

The SEC vs Kraken

The SEC’s suit against Kraken was later dismissed with prejudice in March 2025, with no penalties or admission of wrongdoing, part of a broader retreat after Gensler left and the Trump administration changed course. Operation Choke Point 2.0 has largely been wound down, with earlier guidance rolled back and officials now examining wrongful debanking.

Sethi said the damage went beyond the audit. He wrote that Kraken co-founder and former CEO Jesse Powell had his home raided by federal agents in March 2023 over a dispute with a nonprofit unrelated to the exchange, and said the investigation was closed about two years later with no charges and Powell’s devices returned. Powell has since handed day-to-day control to Dave Ripley, with Sethi later joining as co-CEO.

A call for Clarity

Sethi used the letter to push for the Clarity Act, the crypto market structure bill that would divide oversight of digital assets between the SEC and the CFTC. He argued that proving a lawful crypto business deserves ordinary banking and professional services should never require winning a legal fight.

The bill cleared the Senate Banking Committee in a 15-9 vote in May, after passing the House last year, but stalled before the July 4 recess and still needs a full Senate vote and reconciliation with a companion measure before it could reach the president’s desk.