Kraken parent sues former custodian Etana, CEO over $25M

Payward, the parent company of cryptocurrency exchange Kraken, filed a second amended complaint on May 4, 2026, in the U.S. District Court for the District of Colorado. The complaint alleges that former custody partner Etana and its CEO, Dion Brandon Russell, misappropriated more than $25 million in Kraken customer reserve funds and describes the conduct as ‘Ponzi-like.’

The filing alleges Payward had entrusted Etana with hundreds of millions of dollars under a fiat on-chain custody agreement. The complaint states Etana mixed Kraken customer reserves with its own capital, invested customer assets in risky strategies and issued account statements that showed full balances despite the alleged misuse.

The complaint states Etana moved at least $16 million of Kraken funds into promissory notes issued by Seabury Trade Capital; those notes later bounced and the money was not returned. Payward also alleges Etana placed customer assets into a foreign-exchange trading strategy and retained the profits.

When Kraken attempted to withdraw roughly $25 million from its reserves in April 2025, the complaint says Etana delayed the transfer, cited accounting problems and ultimately lacked sufficient liquidity. The filing alleges Etana used new customer deposits to cover earlier shortfalls.

Colorado regulators issued cease-and-desist and suspension orders against Etana in 2025. Etana entered statutory liquidation in November 2025 and a court-appointed receiver now oversees the company. The receiver reported holding about $6.83 million and identified more than $26 million in liabilities, most of which the complaint says belong to Kraken. In March 2026 Etana’s digital assets were temporarily inaccessible after Amazon Web Services suspended the company’s account for unpaid fees, the complaint notes.

The federal case against the Etana entity is currently stayed. Payward is pursuing claims against Russell personally, alleging he exercised near-total control over daily operations and directed the misuse and concealment of customer funds. Payward is seeking at least $25 million in damages, triple damages under theft statutes, an order to stop further improper conduct and recovery of legal costs.

The receiver is cooperating with Payward by producing documents and making former Etana staff available for questioning, but the complaint warns Etana’s remaining assets fall far short of what is owed. Payward says its recovery will depend on the receivership claims process and any available insurance proceeds, creating a likely protracted creditor dispute in Colorado federal court.

The complaint frames the case as an example of counterparty risk in the cryptocurrency industry, noting safeguards common in traditional finance-such as segregation of client funds and deposit insurance-were not uniformly applied to the custody arrangement. Separately, a March 2025 SEC enforcement action against Kraken was closed with prejudice.