Payward, which operates the cryptocurrency exchange Kraken, has accused former custody partner Etana and its CEO, Dion Brandon Russell, of misappropriating over $25 million in customer funds. This allegation comes from a second amended complaint lodged Monday in U.S. District Court in Colorado.
Kraken claims that Etana Custody, currently undergoing a court-supervised liquidation in Colorado, engaged in a “Ponzi-like” scheme. According to the exchange, Etana mingled customer assets, used them for operational costs and risky investments, and misled customers into believing their funds were safe.
The Wyoming-based company noted that it had invested hundreds of millions into Etana over several years as part of a statutory startup partnership. However, Kraken asserts that Etana created fabricated settlement issues when it sought to withdraw approximately $25 million in reserves in April 2025.
The complaint states that Etana did not have the necessary funds to fulfill withdrawal requests and instead depended on new deposits to cover the gaps.
“Kraken has millions of users and handles hundreds of billions of dollars in transactions quarterly. We didn’t achieve this by being complacent. If you take our money or defraud our customers, we want you to know: We’ll find you, we’ll sue you, and we won’t rest until justice is served,” said Matt Turetsky, Kraken’s head of litigation, via email.
At the time of publication, Etana had not replied to requests for comment.
Counterparty risk—essentially, the risk that a company holding a user’s assets won’t return them—is a pressing issue in the cryptocurrency sphere. Users often have to depend on exchanges, lenders, and custodians to safeguard their funds.
Unlike traditional finance, where stringent measures like segregation, insurance, and supervision are more common, cryptocurrency platforms often operate with looser controls, making asset verification challenging. High-profile collapses, from FTX to smaller custodians, have shown how trust can quickly vanish when these assumptions are violated. The Kraken-Etana dispute brings up similar concerns: are customer funds genuinely protected or at risk due to hidden operational issues?
Kraken is a U.S.-based cryptocurrency exchange run by Payward Inc. It offers spot and derivatives trading, along with custodial and staking services. Launched in 2011, Kraken caters to both retail and institutional clients worldwide and supports trading for assets like Bitcoin and Ether. The platform is recognized for prioritizing security and regulatory compliance across various jurisdictions.
Etana was a custody service focused on cryptocurrency, providing fiat on-ramp and off-ramp solutions while storing assets for exchanges such as Kraken.
The lawsuit alleges multiple instances of misconduct. For example, Etana reportedly channeled at least $16 million of Kraken’s funds into promissory notes from Seabury Trade Capital, which later defaulted. Kraken claims those funds were never returned and may have been diverted to cover Etana’s operating expenses.
In another instance, Etana is accused of using clients’ assets to fund foreign exchange hedging strategies while retaining the resulting investment income for itself.
Throughout this time, Kraken alleged that despite internal financial difficulties, Etana continued to provide account statements and dashboard updates that falsely indicated customer balances were secure and accounted for.
In 2025, with rising regulatory scrutiny, Colorado officials issued a cease-and-desist order and imposed stricter capital requirements. Etana ultimately entered liquidation in November 2025 and is now managed by a court-appointed receiver.
Kraken is seeking at least $25 million in damages, in addition to treble damages under civil theft claims, along with injunctive relief and attorney’s fees.
The complaint also targets Russell, claiming he had almost complete control over Etana’s operations and directed the misuse and concealment of the company’s funds.
Etana is not the only company in the cryptocurrency sector facing liquidity issues; institutional lender Blockfils filed for bankruptcy in March after suspending withdrawals, reporting losses of approximately $75 million and dealing with a lawsuit alleging customer fund misappropriation.
