Kraken's parent company accuses Etana Custody of running a Ponzi-like scheme that misappropriated $25 million in customer funds

[chainsniff]

Payward, the parent company of crypto exchange Kraken, has filed a second amended complaint in Colorado federal court accusing Etana Custody and its CEO Dion Brandon Russell of orchestrating a Ponzi-like scheme that misappropriated more than $25 million in Kraken customer reserve funds. The complaint, filed May 4, 2026, escalates earlier breach-of-contract claims into detailed fraud allegations, accusing Russell personally of directing the misuse of customer funds while issuing dashboard balances showing assets as fully secure. According to the filing, Etana commingled Kraken customer reserves with company money and funneled at least $16 million into Seabury Trade Capital notes that subsequently defaulted. When Kraken requested a roughly $25 million withdrawal in April 2025, Etana stalled with what Payward describes as fabricated reconciliation issues while lacking the liquidity to return the funds. The complaint characterizes the pattern of using incoming deposits to cover prior shortfalls as Ponzi-like in structure.The recovery picture is deeply unfavorable. Etana entered statutory liquidation in November 2025 after Colorado regulators issued cease-and-desist and suspension orders, and the court-appointed receiver has disclosed cash holdings of approximately $6.83 million against liabilities exceeding $26 million, the majority of which represents the Kraken claim.

Crypto holdings stored on AWS were briefly inaccessible after the cloud provider terminated Etana's account over unpaid fees in March 2026. The federal case has been stayed against Etana entities but continues against Russell personally, who faces liability for fraud and civil theft. With the receiver opting against a vigorous defense and cooperating with Payward's document requests, the recovery path depends primarily on the claims process and any available insurance proceeds rather than a contested legal victory.

[etfs]

$6.83M cash against $26M liabilities means Kraken realistically recovers pennies on the dollar through the claims process.

[etfs]

Bro ran a Ponzi inside a custody provider and the dashboard said everything was totally fine