Kraken Sues Etana Custody Over $25M Client Funds Misuse

Crypto exchange Kraken filed a federal lawsuit on May 4, 2025, against custody provider Etana Custody and its CEO, Dion Brandon Russell, in the U.S. District Court for the District of Colorado, alleging the misuse of at least $25 million in client funds.

The complaint claims Kraken entrusted Etana with hundreds of millions of dollars over several years through a partnership for fiat on-ramp services, where Etana acted as a third-party custodian to facilitate transfers between Kraken and traditional banking systems. In April 2025, Kraken requested the full withdrawal of approximately $25 million in reserve funds. Etana delayed the process, citing a prolonged reconciliation, but according to the lawsuit, the firm lacked sufficient assets to fulfill the request.

Kraken alleges that Etana commingled client funds, failing to maintain proper segregation or tracking for individual accounts. Instead, the firm purportedly used customer assets to cover operating expenses and pursue high-risk investments, including at least $16 million in promissory notes from Seabury Trade Capital that later defaulted. The complaint further states Etana employed client funds in foreign-exchange hedging...