SEC v. Payward, Inc. et al. (Kraken), Complaint (unregistered exchange/broker/dealer/clearing agency; commingling allegations ¶¶ 2, 210-221), No. 3:23-cv-06003 (N.D. Cal.), Dkt. 1 (Part 2 of 2)
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Research, not advice. Part of the Bitcoin research archive (October 2026). Claims labelled unverified, contested or fringe are reported, not endorsed; statuses of bills and rules are as of the date checked. Government, court and patent records are public domain; the research notes are CC BY 4.0.
reasonable OMG investors to expect that the
27 demand for OMG would likely increase based on the OMG Network’s efforts to
28 increase demand for its technology, thereby potentially resulting in a price increase
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1 for OMG.
2 423. Public statements made by Kraken about OMG and the OMG Network
3 reinforced investors’ reasonable expectation of profits from an investment in OMG
4 due to the managerial efforts of Omise and the OMG Network team.
5 424. For example, on its website, Kraken describes for investors OMG's
6 history, team, and development, noting the “OMG Network is developed by Omise
7 Go Pte Ltd., a subsidiary of Omise, a Thailand-based payments processor founded in
8 2013. Previously known as Omisego, Omise rebranded to OMG Network on June
9 1st, 2020.”
10 425. Kraken further provides investors with analysis about the price of OMG.
11 Specifically, Kraken’s website states: “Should Omise bridge the gap between
12 centralized and decentralized financial networks with OMG Network, the OMG
13 cryptocurrency could be of interest to long-term traders as well.”
14 11. SOL
15 426. “SOL” is the native token of the Solana blockchain. The Solana
16 blockchain was created by Solana Labs, Inc. (“Solana Labs”), a Delaware corporation
17 headquartered in San Francisco that was founded in 2018 by Anatoly Yakovenko
18 (“Yakovenko”) and Raj Gokal (Solana Labs’ current CEO and COO, respectively).
19 According to Solana’s website, www.solana.com, the Solana blockchain is a network
20 upon which decentralized apps (“dApps”) can be built, and is comprised of a platform
21 that aims to improve blockchain scalability and achieve high transaction speeds by
22 using a combination of consensus mechanisms.
23 427. According to Solana’s website, SOL may be “staked” on the Solana
24 blockchain to earn rewards, and a certain infinitesimal amount of SOL must be
25 “burned” to propose a transaction on the Solana blockchain, a common function for
26 native tokens on blockchains that constitutes a method for cryptographically
27 distributed ledgers to avoid a potential bad actor from “spamming” a blockchain by
28 overwhelming it with an infinite number of proposed transactions.
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1 428. Between May 2018 and early March 2020, Solana Labs filed with the
2 SEC multiple forms claiming that its offers and sales of securities—what Solana
3 described in those forms as the “sale and issuance of rights to receive Solana Labs,
4 Inc. tokens in the future via a [SAFT]”—were exempt from registration under Rule
5 506(c) of Regulation D under the Securities Act. Through these offers and sales of
6 securities, Solana sold approximately 177 million SOL, raising over $23 million.
7 429. Later in March 2020, Solana Labs conducted additional SOL sales on
8 the CoinList trading platform (www.coinlist.co) in a “Dutch auction” (wherein
9 investors place bids and the entire offering occurs at the price with the highest
10 number of bidders). During this offering, Solana Labs sold approximately 8 million
11 SOL, at an average price of $0.22 per SOL, raising approximately $1.76 million. In
12 August 2021, Solana Labs completed another, purportedly private sale of SOL,
13 raising over $314 million from investors, each of whom paid for SOL with fiat
14 currency and was required to sign a purchase agreement.
15 430. Beginning in February 2020, Solana Labs took steps to make SOL
16 available for trading on crypto asset trading platforms. For example, in a September
17 17, 2020, Twitter post, Solana Labs stated: “The Solana community in the United
18 States has been eagerly awaiting the chance to trade SOL on a U.S. exchange, and
19 now that day has come. SOL/USDT, SOL/USD, and SOL/BTC pairs are all open for
20 trading on @ftx_us.” In another Twitter post later the same day, Solana Labs stated:
21 “@BinanceUS announces Support for SOL, making it the Second US Exchange to
22 list SOL within one day.”
23 431. From the time of its offering and continuing through the Relevant
24 Period, SOL was offered and sold as an investment contract and therefore a security.
25 432. The price of all SOL tokens goes up or down together.
26 433. SOL has been available for buying, selling, and trading on the Kraken
27 Trading Platform and through the Kraken Services since approximately June 2021.
28 434. The information Solana Labs publicly disseminated would lead a
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1 reasonable investor, including those who purchased SOL since June 2021, to view
2 SOL as an investment. Specifically, SOL holders would reasonably expect to profit
3 from Solana Labs’ efforts to grow the Solana protocol because this growth would in
4 turn increase the demand for and the value of SOL.
5 435. Solana Labs stated publicly that it would pool the proceeds from its
6 private and public SOL sales in omnibus crypto asset wallets that it controlled, and
7 that it would use those proceeds to fund the development, operations, and marketing
8 efforts with respect to the Solana blockchain in order to attract more users to that
9 blockchain (potentially increasing the demand for, and therefore the value of, SOL
10 itself, given the need for those who wish to interact with the Solana blockchain to
11 tender SOL). For example, in connection with the 2021 private sale of SOL, Solana
12 Labs stated publicly that it would use investor funds to: (i) hire engineers and support
13 staff to help grow Solana’s developer ecosystem; (ii) “accelerate the deployment of
14 market-ready applications focused on onboarding the next billion users into crypto”;
15 (iii) “launch an incubation studio to accelerate the development of decentralized
16 applications and Platforms building on Solana”; and (iv) develop a “venture investing
17 arm” and “trading desk dedicated to the Solana ecosystem.”
18 436. As Solana Labs stated publicly, of the 500 million SOL tokens initially
19 minted, 12.5% were allocated to Solana Labs’ founders, including Yakovenko and
20 Gokal, and another 12.5% were allocated to the Solana Foundation, a non-profit
21 organization headquartered in Zug, Switzerland “dedicated to the decentralization,
22 growth, and security of the Solana network.” In fact, on April 8, 2020, Solana Labs
23 transferred 167 million SOL tokens to the Solana Foundation, and in its public
24 announcement of the Solana Foundation’s formation, Solana Labs stated that “[t]he
25 Foundation’s initial focus is expanding and developing the ecosystem of the Solana
26 protocol.”
27 437. Solana Labs’ two original founders have worked for the Solana
28 Foundation. Gokal currently serves as a member of the Solana Foundation Council.
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1 And Yakovenko was a member and President of the Solana Foundation Council from
2 its founding until December 2021, when he stepped down to focus on his work at
3 Solana Labs.
4 438. In public statements on its website and social media pages, including
5 statements made and available during the period when SOL was available to trade on
6 the Kraken Trading Platform and through the Kraken Services, Solana specified its
7 expertise in developing blockchain networks and described the efforts Solana and its
8 founders had made and would continue to make to develop the Solana blockchain
9 protocol and attract users to the technology, which, again, required those utilizing the
10 technology to demand some amount of SOL.
11 439. Solana Labs undertook other promotional efforts to increase
12 participation in its network and thus demand for SOL, including with: (a) a Solana
13 podcast of which there have been at least 90 episodes since July 2019, with
14 interviews of key Solana Labs management and other key personnel, including
15 Yakovenko; (b) a YouTube channel with over 37,000 subscribers; and (c) dedicated
16 Telegram, Twitter, Reddit, Solana Forums, Discord, GitHub, Meetup, and Weibo
17 channels, with links to each available on Solana’s website.
18 440. These promotional statements that Solana Labs made in these fora with
19 respect to SOL and Solana Labs’ efforts to increase demand and value for SOL
20 included, for example:
21 • A July 28, 2019 post on Solana Labs’ Medium blog in which Yakovenko
22 stated that “Solana … supports upwards of 50,000 TPS” (transactions
23 per second) “making it the most performant blockchain and the world’s
24 first web-scale decentralized network” and that the “Solana team—
25 comprised of pioneering technologists from [several high-profile
26 technology companies]—has focused on building the tech required for
27 Solana to function with these groundbreaking performance standards”;
28 • Solana’s website statement that “Solana is engineered for widespread,
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1 mainstream use by being energy efficient, lightning fast, and extremely
2 inexpensive” and that “[m]any of the core Solana builders, like co-
3 founder Anatoly Yakovenko, have a background in building cell phone
4 networks,” which “means that they are singularly focused on building
5 for scalability (the ability to grow) and efficiency (the ability to get the
6 most information across with the least amount of resources)”;
7 • An April 14, 2021 post on gemini.com in which Yakovenko touted the
8 Solana network’s ability to “support a theoretical peak capacity of
9 65,000 transactions per second, currently” (“around 10,000 times faster
10 than Bitcoin, 4,000 times faster than Ethereum, and 35 times faster than
11 Ripple—even around 2.5 times faster than Visa”) and projecting that
12 such speed would “doubl[e] in capacity every two years with
13 improvements in hardware and bandwidth”; and
14 • A December 23, 2022 post on Solana’s website marketing various
15 “upgrades” that Solana and its engineers would undertake, including
16 “turbine optimizations” introduced by the “core engineering team,”
17 which Yakovenko described as the “coolest piece of technology that we
18 built that nobody knows about.”
19 441. Further, Solana Labs markets that it “burns” (or destroys) SOL tokens as
20 part of a “deflationary model.” As Yakovenko explained in an April 14, 2021 article
21 entitled “Solana (SOL): Scaling Crypto to the Masses” posted on gemini.com,
22 “Solana transaction fees are paid in SOL and burnt (or permanently destroyed) as a
23 deflationary mechanism to reduce the total supply and thereby maintain a healthy
24 SOL price.” As explained on the Solana website, since the Solana network was
25 launched, the “Total Current Supply” of SOL “has been reduced by the burning of
26 transaction fees and a planned token reduction event.” This marketed burning of
27 SOL as part of the Solana network’s “deflationary mechanism” has led investors
28 reasonably to view their purchase of SOL as having the potential for profit to the
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1 extent there is a built-in mechanism to decrease the supply and therefore increase the
2 price of SOL.
3 442. Public statements made by Kraken about SOL and the Solana Protocol
4 reinforced investors’ reasonable expectation of profits from an investment in SOL
5 due to the managerial efforts of Solana Labs.
6 443. For example, on its website, Kraken describes for investors SOL’s
7 history, team, and development. Further, Kraken provides investors with analysis
8 about the price of SOL. Specifically, Kraken’s website states: “Solana’s
9 comparatively large market cap demonstrates the wider crypto community’s belief in
10 the future of the Solana ecosystem.”
11 444. Kraken went on to explain: “Crypto market participants that see a long-
12 term prospect in the Solana blockchain may choose to dollar cost average (DCA) in
13 SOL tokens. For those not interested in timing the market or finding the perfect time
14 to buy, dollar cost averaging may be the most effective strategy for accumulating
15 SOL.”
16 445. Further, Kraken stated on its site: “By setting up a recurring buy of SOL,
17 you can accumulate SOL regularly over time. Those that believe in the potential of
18 the Solana blockchain over the long term may choose to simply set up a recurring buy
19 of SOL tokens on a regular basis rather than making a large, one-time purchase of
20 SOL all at once.”
21 FIRST CLAIM FOR RELIEF
22 Violations of Exchange Act Section 5
23 (Payward and Payward Ventures)
24 446. The Commission realleges and incorporates by reference here the
25 allegations in paragraphs 1 through 445.
26 447. By engaging in the acts and conduct described in this Complaint,
27 Payward and Payward Ventures, directly or indirectly, made and continues to make
28 use of the mails and the means and instrumentalities of interstate commerce for the
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1 purpose of using any facility of trading platforms that constitute exchanges within or
2 subject to the jurisdiction of the United States, in order to effect transactions in a
3 security, or to report any such transaction, without registering as national securities
4 exchange under Exchange Act Section 6 [15 U.S.C. § 78f], and without being
5 exempted from such registration.
6 448. By reason of the conduct described above, each of Payward and
7 Payward Ventures, directly or indirectly, violated, are violating, and, unless enjoined,
8 will continue to violate Exchange Act Section 5 [15 U.S.C. § 78e].
9 SECOND CLAIM FOR RELIEF
10 Violations of Exchange Act Section 15(a)
11 (Payward and Payward Ventures)
12 449. The Commission realleges and incorporates by reference here the
13 allegations in paragraphs 1 through 445.
14 450. By engaging in the acts and conduct described in this Complaint,
15 Payward and Payward Ventures, persons other than a natural person under the
16 Exchange Act, are each a broker and dealer and each made and continues to make use
17 of the mails and the means and instrumentalities of interstate commerce to effect
18 transactions in, or to induce or attempt to induce the purchase or sale of, securities,
19 without registering as a broker or dealer in accordance with Exchange Act Section 15
20 [15 U.S.C. § 78o], and without being exempted from such registration.
21 451. By reason of the conduct described above, each of Payward and
22 Payward Ventures, directly or indirectly, violated, is violating, and, unless enjoined,
23 will continue to violate Exchange Act Section 15(a) [15 U.S.C. § 78o(a)].
24 THIRD CLAIM FOR RELIEF
25 Violations of Exchange Act Section 17A
26 (Payward and Payward Ventures)
27 452. The Commission realleges and incorporates by reference here the
28 allegations in paragraphs 1 through 445.
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1 453. By engaging in the acts and conduct described in this Complaint,
2 Payward and Payward Ventures, directly or indirectly, each made and continues to
3 make use of the mails and the means and instrumentalities of interstate commerce to
4 perform the functions of a clearing agency with respect to securities, without
5 registering in accordance to Section 17A(b) [15 U.S.C. § 78q-1(b)] of the Exchange
6 Act and without being exempted from registration.
7 454. By reason of the conduct described above, each of Payward and
8 Payward Ventures, directly or indirectly, violated, is violating, and, unless enjoined,
9 will continue to violate Exchange Act Section 17A [15 U.S.C. § 78q-1].
10
11 PRAYER FOR RELIEF
12 WHEREFORE, the SEC respectfully requests that the Court:
13 I.
14 Issue findings of fact and conclusions of law that Defendants committed the
15 alleged violations.
16 II.
17 Issue judgments, in forms consistent with Rule 65(d) of the Federal Rules of
18 Civil Procedure, permanently enjoining Defendants, and their officers, agents,
19 servants, employees, and attorneys, and those persons in active concert or
20 participation with any of them, who receive actual notice of the judgment by personal
21 service or otherwise, and each of them, from violating, directly or indirectly, Sections
22 5, 15(a), or 17A of the Exchange Act [15 U.S.C. §§ 78e, 78o(a), 78q-1(b)].
23 III.
24 Prohibiting, pursuant to Section 21(d)(5) of the Exchange Act [15 U.S.C. §
25 78u(d)(5)], Defendants and their officers, agents, servants, employees, and attorneys,
26 and those persons in active concert or participation with any of them, who receive
27 actual notice of the judgment by personal service or otherwise, and each of them,
28 from using means or instrumentalities of interstate commerce to: (i) act as an
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1 unregistered exchange with respect to any securities, including any crypto asset
2 securities; (ii) act as unregistered broker or dealer with respect to any securities,
3 including any crypto asset securities; or (iii) act as an unregistered clearing agency
4 with respect to any securities, including any crypto asset securities.
5 IV.
6 Order Defendants to disgorge all ill-gotten gains, together with prejudgment
7 interest thereon.
8 V.
9 Order Defendants to pay civil penalties under Section 21(d)(3) of the Exchange
10 Act [15 U.S.C. § 78u(d)(3)].
11 VI.
12 Retain jurisdiction of this action in accordance with the principles of equity and
13 the Federal Rules of Civil Procedure in order to implement and carry out the terms of
14 all orders and decrees that may be entered, or to entertain any suitable application or
15 motion for additional relief within the jurisdiction of this Court.
16 VII.
17 Grant such other and further relief as this Court may determine to be just and
18 necessary.
19
20 Dated: November 20, 2023
21 /s/ Daniel Blau
Daniel Blau
22 Alec Johnson
23 Peter Moores
Elizabeth Goody
24 Attorneys for Plaintiff
25 Securities and Exchange Commission
26
27
28
COMPLAINT 90