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Kraken's parent Payward secured a $22 million arbitration award against auditor Mazars USA and asked the Delaware Court of Chancery on Tuesday to enter it as final judgment. An arbitrator ruled that Mazars breached its engagement when it walked away from a nearly finished audit of Kraken in 2022, during the peak of the post-FTX debanking push later branded Operation Choke Point 2.0. Payward co-CEO Arjun Sethi said Mazars confirmed in writing at the time that it had no disagreement with Kraken's management, no integrity concerns, and no fraud findings.
Why it matters
The award is the most concrete dollar figure yet attached to OPC 2.0. Sethi's post reconstructs a familiar pressure chain: the FDIC quietly sent at least 25 letters to 24 banks urging them to pause or unwind crypto relationships, while the SEC under Gary Gensler was suing or investigating dozens of crypto firms, including Kraken itself. Mazars cited "uncertainty and risk from legal developments" when it dropped Kraken mid-engagement. Mazars had already halted all crypto proof-of-reserves work in 2022.
The reputational cost extended well beyond the audit. Sethi notes that Kraken's founder and former CEO Jesse Powell had his home raided by federal agents in March 2023, and that smaller firms were likely permanently impaired by the same pressure. Most of the SEC's crypto enforcement actions have since been dropped after Gensler's departure.
Market impact
The arbitrated $22M is a small line item for Kraken but a symbolic one for an industry that spent three years unable to get banks, auditors, and counterparties to sign paperwork they had signed routinely before 2022. The Federal Reserve and FDIC have since pulled reputational-risk language from bank examinations, and the Trump administration has opened its own probe into wrongful debanking. Sethi is using the moment to amplify the push for the Clarity Act, which would formally divide SEC and CFTC jurisdiction over digital assets and is currently working through Senate committees.
Frequently asked questions
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Why did Kraken sue its auditor Mazars?
Payward sued Mazars after the firm walked away from a nearly completed audit of Kraken in 2022. Kraken argued Mazars abandoned the engagement due to political and regulatory pressure tied to the post-FTX crackdown, despite confirming in writing it had no fraud findings or management concerns.
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What is Operation Choke Point 2.0?
Operation Choke Point 2.0 is the term coined by Nic Carter for the post-FTX pressure campaign in which US banking regulators, including the FDIC, Fed, and OCC, reportedly pushed banks to cut ties with crypto firms. Sethi's post cites at least 25 FDIC letters to 24 banks urging them to pause or unwind crypto…
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How much did the arbitration award Kraken?
The arbitrator awarded Payward $22 million. Payward has asked the Delaware Court of Chancery to enter the award as final judgment, which would make it enforceable against Mazars.
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What happened to the SEC's case against Kraken?
The SEC's complaint against Kraken was dropped after Gary Gensler stepped down as chair, along with most of the agency's other pending crypto enforcement actions.
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What is the Clarity Act and why does Kraken care?
The Clarity Act would formally divide regulatory jurisdiction between the SEC and CFTC over digital assets. Sethi used the Mazars arbitration win to push lawmakers to pass the bill, arguing no founder should need to win an arbitration just to access basic financial infrastructure.
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