Kraken owner Payward sues former custodian Etana, alleging $25 million in customer funds was misappropriated

Payward Inc., the parent company of crypto exchange Kraken, has sued former custody partner Etana Custody and its CEO Dion Brandon Russell in a Colorado court, alleging they improperly used more than $25 million of customer assets and ran a "Ponzi-like" operation. According to the complaint, Etana allegedly commingled assets held in custody to cover operating costs and fund high-risk investments, while repeatedly issuing misleading client statements that funds remained safe. Payward says it sought to withdraw about $25 million in April 2025 but faced delays and was ultimately refused payment on the grounds of "reconciliation issues." The suit also alleges Etana invested at least $16 million of client money into note-related projects that later defaulted, and used additional assets for FX hedging trades while keeping the proceeds. Payward says the funds have not been returned. Etana has since entered Chapter 11 bankruptcy and is operating under court supervision. Payward is seeking at least $25 million in damages and may pursue treble damages and other remedies. The case underscores ongoing counterparty and segregation risks in the crypto custody market, where the safeguarding and separation of client assets remains a central concern. (CoinDesk)