Kraken sued by ex-employee

[Baofeng]

Official court documents:

https://www.docdroid.net/rbU65Yu/07071236.pdf

Allegations/Summary:

Runyon started work at Kraken as a financial analyst on 26 March 2018. Kaiser Ng, Kraken’s chief financial officer, was his immediate boss.

Runyon’s first assignment, starting 30 March, was to help with an audit. Ng told Runyon to “come up with anything for the audit list that would satisfy the questions without regard to how accurate the info was” — Ng wanted whatever would “check the box.”

In August 2018, Ng asked if he could use Runyon’s home address as his own — on legal, licensing and banking documents.

Ng claimed concern for his family’s safety, having heard of kidnappings related to crypto exchanges. Runyon wasn’t convinced, so Ng offered to pay Runyon $1,600 a month rent for a room in his apartment, so Ng could use that address on official forms. Runyon says Ng never paid the rent.

Runyon was concerned that several of the countries that Kraken dealt with were on the Office of Foreign Assets Control’s Specially Designated Nationals And Blocked Persons List. That is — they were sanctioned, and it was hugely illegal for Kraken to operate in those countries.

In March 2019, Runyon was asked by Ng to reconcile Kraken customer account balances with the company’s bank balances, in various currencies. Runyon discovered that Kraken’s bank accounts were millions of dollars short, compared to the total customer funds that Kraken should have had on hand.

Runyon called this to Ng’s attention — he was worried that someone had found their way into the system, and was bleeding the funds. Ng immediately removed Runyon from the project.

Around 7 May, Runyon noticed that two employees’ stock options grant vesting schedules were different in the program to what had been set in the 27 November 2017 Board minutes. He assumed it was an error, and corrected it. One of the two employees contacted him to learn how to exercise their options — and Runyon saw the numbers had changed back.

Runyon asked Ng about this. Ng told him the board was amending the terms — and that it wasn’t an issue because … the employee didn’t know about it.

Runyon asked to use some of his paid time off to deal with the stress of long hours at work, having taken none in over a year of employment. Ng approved the leave — then fired Runyon over Zoom chat on his first day of leave, nine days after the second time Runyon had brought the stock options issues to Ng’s attention.

https://davidgerard.co.uk/blockchain/2019/12/17/kraken-exchange-sued-by-whistleblowing-ex-employee-allegations/

What do you guys think? It looks like the whistle blower "exposed" what we knew about exchanges from behind, there are a lot of tricks being pulled to just fit their narratives, specially how Runyon found out that the exchanges are short of millions of dollars.

[1715240459]

1715240459

[1715240459]

1715240459

[1715240459]

1715240459

[gentlemand]

There's no end to the crap an embittered ex employee will pull and they'll be fully conscious of the effect stories like this will have on anything crypto related.

All the same no one has the slightest clue what goes behind the scenes at a crypto exchange so it could be unimaginably worse for all we know.

I'll continue dipping in to Kraken when necessary and running away as quickly as possible.

[TravelMug]

Only in the US wherein I see employees suing their former employee for wrongly termination. Here, the process will take years and there's no assurance that you can win.

Anyways, let's see what the court gonna say, I mean his story might be true, but we don't know until facts are presented. yes, we could all suspect that something fishing might be going behind the scene, but I don't know that if he was terminated because he unravel the scheme.

[squatter]

There's no end to the crap an embittered ex employee will pull and they'll be fully conscious of the effect stories like this will have on anything crypto related.

Kraken’s CFO certainly comes off as a shady character. My curiosity has been piqued. The bit about him using the plaintiff's home address for legal and regulatory filings is bizarre. We can't know whether the whistle blowing stuff is true, but Runyon's lawyer can attest to that one.

[gentlemand]

Kraken’s CFO certainly comes off as a shady character. My curiosity has been piqued. The bit about him using the plaintiff's home address for legal and regulatory filings is bizarre. We can't know whether the whistle blowing stuff is true, but Runyon's lawyer can attest to that one.

Of all the established exchanges I'd be least surprised if Kraken turned out to be the slackest. You don't hear very much at all about their regulatory efforts compared to places like Gemini and Coinbase.

If this bloke was alleging the same about Coinbase I'd consider it total bilge. It doesn't feel outside the bounds of reality for Kraken. But still I'll believe it when I see it.

[squatter]

Of all the established exchanges I'd be least surprised if Kraken turned out to be the slackest. You don't hear very much at all about their regulatory efforts compared to places like Gemini and Coinbase.

If this bloke was alleging the same about Coinbase I'd consider it total bilge. It doesn't feel outside the bounds of reality for Kraken. But still I'll believe it when I see it.

I've got similar feelings. Kraken has always seemed more slippery than the other American exchanges. Their response to the NYAG inquiry and complaints about US regulatory burdens definitely put them in Bitfinex's league, not Coinbase's. They used to work with the likes of Crypto Capital too.

Nevertheless, I never take claims like this at face value. There is always more to the story.

[malevolent]

I've got similar feelings. Kraken has always seemed more slippery than the other American exchanges. Their response to the NYAG inquiry and complaints about US regulatory burdens definitely put them in Bitfinex's league, not Coinbase's. They used to work with the likes of Crypto Capital too.

I don't see anything suspicious in these remarks, there's probably no single country which has been more detrimental to Bitcoin's growth and adoption. Back when Mark Karpeles was thinking about reviving Mt. Gox, he estimated US compliance costs to be 10x as high as those of Europe and Japan (combined):

https://blog.magicaltux.net/article/MtGox-Bankruptcy

[Harlot]

This will just be a walk in the park for any prosecutor holding this case since if everything check in woth what he is saying Kraken will be found guilty of illegaly operating in those countries. Proving that they have customers in those country is also easy since they will have records of it found both inside Kraken's database. Aside from that cases like this where too many moving pieces are involved is hard to cover up and I don't think Kraken's lawyers will have a lot of excuses to used in where Runyon is not the only evidence/witness against them.

[Yaunfitda]

There's no end to the crap an embittered ex employee will pull and they'll be fully conscious of the effect stories like this will have on anything crypto related.

Kraken’s CFO certainly comes off as a shady character. My curiosity has been piqued. The bit about him using the plaintiff's home address for legal and regulatory filings is bizarre. We can't know whether the whistle blowing stuff is true, but Runyon's lawyer can attest to that one.

That's certainly a bit off isn't it? Using employees address? If I'm Runyon then definitely there's some red flag in it already.

The CFO might thought that Runyon will just play all along. Lot's of shady practice was exposed here and perhaps many exchanges are doing the same as well but no one came forward because they either afraid or they are being paid handsomely to somewhat keep quiet.

I guess this case could drag for months before we can finally see who is telling the truth.

[squatter]

I've got similar feelings. Kraken has always seemed more slippery than the other American exchanges. Their response to the NYAG inquiry and complaints about US regulatory burdens definitely put them in Bitfinex's league, not Coinbase's. They used to work with the likes of Crypto Capital too.

I don't see anything suspicious in these remarks, there's probably no single country which has been more detrimental to Bitcoin's growth and adoption.

I can agree with that. That's not the issue.

Can you imagine Coinbase or Gemini making such remarks? Publicly calling a questionnaire from the NYAG "abuse" and saying any exchange who responds is "kowtowing?" I can't. Coinbase and Gemini actually welcome burdensome regulation because it suppresses their smaller competitors. For Gemini, it's even a marketing ploy:



Bitfinex is the only other exchange I can think of that is needlessly inflammatory in its public statements. Between what they say publicly and who they do business with, they are both in a different league than the squeaky clean exchanges like Gemini.

[malevolent]

Sure, I can agree with that. In that regard Kraken might be a bit closer to Bitfinex than Gemini/Coinbase. Yeah, I remember those ads + Winklevosses calling for more regulation.

[blandana]

Millions of dollars short.  You would think one of these exchanges wouldn't use their commission funds and cold wallets to gamble.  Or...well...how does "millions of dollars" just go missing?  What's going to be left?  

I'm really tired of this.  Someone's going to have to admit this was all about a reddit joke someday or something like that.  This isn't an argument where you just try and shout at people to make 200 million dollar insults in the market trying to buy bitcoin at bad times.

[jseverson]

Regardless of whether he's telling the truth or not, is it possible for Kraken to try to settle out of court? This is just a discrimination suit after all. If so, what will happen to the shady business practices allegations? I imagine regulators are going to be watching this very closely, but I don't know if they could actually use a dropped lawsuit as a basis for an investigation.

[squatter]

Millions of dollars short.  You would think one of these exchanges wouldn't use their commission funds and cold wallets to gamble.  Or...well...how does "millions of dollars" just go missing?  What's going to be left?

It may not be so bad. I used to reconcile lots of bank accounts for a law firm and its clients. It wasn't uncommon to find discrepancies worth 6 or 7 figures. Embezzlement usually wasn't the reason, just missing or erroneous database entries. This guy definitely didn't have full forensic access to Kraken's accounts, so while his concerns seem legitimate, we need to take them with a grain of salt.

[Kemarit]

Regardless of whether he's telling the truth or not, is it possible for Kraken to try to settle out of court? This is just a discrimination suit after all. If so, what will happen to the shady business practices allegations? I imagine regulators are going to be watching this very closely, but I don't know if they could actually use a dropped lawsuit as a basis for an investigation.

This is a precedent if I'm not mistaken, so we can't really say if this could be settled out of court, but I wouldn't be surprised if Kraken did with non-disclosure agreement to silent and let this issue settle down and be forgotten.

For sure regulators are going to keep a close eye on it and see what this precedent affect allegations from former employees.

[blandana]

Millions of dollars short.  You would think one of these exchanges wouldn't use their commission funds and cold wallets to gamble.  Or...well...how does "millions of dollars" just go missing?  What's going to be left?

It may not be so bad. I used to reconcile lots of bank accounts for a law firm and its clients. It wasn't uncommon to find discrepancies worth 6 or 7 figures. Embezzlement usually wasn't the reason, just missing or erroneous database entries. This guy definitely didn't have full forensic access to Kraken's accounts, so while his concerns seem legitimate, we need to take them with a grain of salt.

Oh, thanks for the information.

[Yaunfitda]

So how many Federal banking regulations supposedly Kraken violated here?

Falsifying business records or business address is already a crime right? If I'm the whistle blower, I wouldn't go for out of settlement though, he already drag himself here so why the hell will he do that?

[pushups44]

Well, right now it's a he said, she said situation. I have tended to see Kraken as among the more legitimate exchanges, but I suppose corruption can happen within any sizeable financial institution. Fortunately, the U.S. has employment laws that allow employees and former employees to challenge their employers. Over time, we may learn more as court documents are released to the public. However, it's worth keeping in mind that there is a presumption of innocence in the U.S.

[magneto]

What do you guys think? It looks like the whistle blower "exposed" what we knew about exchanges from behind, there are a lot of tricks being pulled to just fit their narratives, specially how Runyon found out that the exchanges are short of millions of dollars.

That would certainly be very, very interesting.

The potential of this happening alone should be sufficient to prompt some users to run from the exchange. It's definitely not good for Kraken's point of view if they were indeed running on fractional reserves. I also don't see the benefit of the accuser lying, which suggests to me that there is a high probability that what is being said is true.

Anyhow, just beware of Kraken for now, as they could certainly be running a fractional reserve, which is prone to runs.

[Baofeng]

So how many Federal banking regulations supposedly Kraken violated here?

Falsifying business records or business address is already a crime right? If I'm the whistle blower, I wouldn't go for out of settlement though, he already drag himself here so why the hell will he do that?

We really can't say for certain what's the real intention of Runyon here.

Anyhow, just beware of Kraken for now, as they could certainly be running a fractional reserve, which is prone to runs.

Right, I do hope that they are not the next exchange to 'shutdown' because of the pending case, but to be on the safe side, I wouldn't put put some of my money on Kraken because of the ongoing issues.

[gentlemand]

Anyhow, just beware of Kraken for now, as they could certainly be running a fractional reserve, which is prone to runs.

There's no way one minor employee will ever get or be given an overview of how an entire exchange operates. They can call out what they see but other areas might be completely covering whatever holes he's seeing. We'll see what emerges but no matter what happens it should remind us that none of us have a clue what's happening back there.