Kraken Parent Company Payward Sues Custodian Etana: Alleging Misappropriation of $25 Million in a 'Ponzi-like' Scheme

Odaily reported that Payward Inc. (Kraken's parent company) has filed a lawsuit in a Colorado state court, accusing its former custody partner Etana Custody and its CEO Dion Brandon Russell of misappropriating over $25 million in client funds and operating a 'Ponzi-like scheme.'

The lawsuit alleges that Etana commingled custodial assets, using them for operational expenses and high-risk investments, and plugged funding gaps with new money while continuously providing clients with false reports that their funds were 'intact.' Kraken stated that when it attempted to withdraw approximately $25 million in April 2025, it faced delays, with the custodian refusing to honor the request citing 'reconciliation issues.'

Furthermore, Etana is accused of investing at least $16 million of client funds into a defaulted note project, using some assets for foreign exchange hedging trades while retaining the profits. The relevant funds have not been returned to date. Etana has now entered Chapter 11 bankruptcy reorganization proceedings and is under court receivership. Payward is seeking at least $25 million in damages, with the potential to pursue treble damages and other legal remedies. This incident once again highlights the counterparty risk in the crypto custody sector, where the question of whether client assets are truly segregated and securely stored remains a focal point for the market. (CoinDesk)