Bitcoin Exchange Kraken Faces $900k Lawsuit From Former Employee

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KONSKIE, POLAND - March 31, 2019 Man holding smartphone with Kraken cryptocurrency exchange logo - Image

A trading desk manager formerly employed with cryptocurrency exchange Kraken has sued the company for more than $900,000.

He alleges that Jesse Powell, the founder of Kraken, backtracked on an earlier promise and didn’t pay him for the work he had done before parting ways with the company.

Breach of Agreement?

Jonathan Silverman, the disgruntled former Kraken employee at the heart of the controversy, claims that he was hired in April 2017 to oversee the exchange’s institutional sales and trading desk in New York.

Per the allegations, Kraken boss Jesse Powel promised Silverman 10% of the annual profit racked-up by exchange’s trading desk (in addition to a salary of $150,000). However, the lawsuit adds, he was not paid the promised commission or the additional options for stocks.

According to a separate lawsuit filed by another disgruntled former employee, Kraken’s trading desk in New York earned more than $19 million in profit between September 15, 2017, to December 31, 2017.

After resigning from Kraken, Silverman reached an agreement with the company that would pay him $907,631 as a lump sum settlement, according to Bloomberg.

However, the lawsuit now accuses that Kraken has since backtracked on that agreement too and is refusing to pay Silverman his dues.

A Kraken spokesperson has refuted the charges by claiming that Silverman “is both lying and in breach of his confidentiality agreement.”

Legal Complications

Silverman filed the lawsuit in the state of New York, which seems to have further complicated the case for both parties.

The Kraken CEO has previously gone on record saying that the exchange is not answerable to New York rules and regulations as it has not operated in the state for years.

One of the oldest digital currency exchanges around, Kraken stopped its New York services in 2015 after the New York State Department of Financial Services introduced the new business license of virtual currency activities, commonly referred to as the BitLicense protocol.

The exchange called the new regulatory framework “so dirty, cruel a creature that even Kraken lacks the courage or strength to resist his dirty, pointed teeth.”

(A Kraken blog post outlining the company’s stand vis-a-vis the BitLicense protocol can be found here.)

The controversy resurfaced in 2018 following reports of the exchange’s continued activities in New York. Kraken even refused to entertain a voluntary request for information from the state’s Attorney General saying that it was not undertaking any illegal operations in New York.

Slamming Kraken’s public stance of being non-operational in New York, Silverman added in the lawsuit that the company is deliberately “misrepresenting to the public and government regulations.”

On the issue of top Kraken’s no love lost for New York’s crypto regulations, one of the attorneys representing Silverman said:

“Just because some people in the cryptocurrency space don’t believe the rules apply to them doesn’t mean that’s the way things actually work.”

Silverman alleged in his lawsuit that most of Kraken’s over-the-counter trading was happening almost exclusively in the state of New York.

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