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Payward, Inc., the parent company of crypto exchange Kraken, has filed an amended complaint in U.S. District Court for Colorado alleging that custodian Etana Custody misappropriated more than $25 million in client assets it was entrusted to hold. The filing adds a fraud claim against Etana and its CEO Dion Brandon Russell, accusing them of operating a "Ponzi-like enterprise that depended on the continuous flow of new customer deposits." Kraken said discovery showed the missing funds were "not the result of mere mismanagement or poor recordkeeping" but were used "in part" to pay Etana's "operating expenses and fund risky investments." The Colorado Banking Board placed Etana into liquidation in November 2025 after the custodian failed to maintain capital requirements; Kraken had entrusted it with hundreds of millions of dollars in client funds before the unwind. The exchange is seeking the return of the $25 million plus interest and attorney's fees. Counsel for Etana and Russell dispute the allegations.
Why it matters
The complaint is a rare public airing of what happens to client assets when a regulated US custodian fails — and a reminder that even sophisticated counterparties can be exposed. Payward's allegation that Etana commingled client money to fund operations and "risky investments" strikes at the core of what custody is supposed to mean: segregation, capital adequacy, and a clean claim on the underlying assets. Etana was already in regulatory trouble when Kraken moved to claw its money back; the new fraud claim reframes a capital shortfall as an alleged scheme.
Market impact
The optics are bad for the broader qualified-custodian segment. The Colorado Banking Board's November 2025 liquidation was framed as a capital-requirements failure, but a "Ponzi-like" characterisation in a federal court filing is a different kind of stain — the kind regulators read when they scope supervision of digital-asset custodians.
Frequently asked questions
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What does Kraken's parent company allege Etana Custody did?
Payward, Inc. alleges in an amended Colorado federal court complaint that Etana Custody misappropriated more than $25 million in client assets it was holding for Kraken, using the funds in part to pay operating expenses and fund risky investments.
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Who is named in the new fraud claim?
The amended complaint adds a fraud claim against Etana Custody and its CEO Dion Brandon Russell, accusing them of operating a 'Ponzi-like enterprise that depended on the continuous flow of new customer deposits.' Counsel for the defendants dispute the allegations.
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How much money did Kraken entrust to Etana?
According to the court filing, Kraken entrusted Etana with hundreds of millions of dollars in client funds, of which more than $25 million has not been returned.
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Why was Etana Custody placed into liquidation?
The Colorado Banking Board placed Etana into liquidation in November 2025 after the custodian was unable to maintain capital requirements, predating the new fraud allegations.
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What is Kraken asking the court to award?
Kraken is asking the court to order Etana and Russell to return the $25 million plus interest and attorney's fees. The next gating event is a motion-to-dismiss ruling on the fraud claim.
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