United States-based cryptocurrency exchange Kraken has frozen the accounts associated with “FTX Group, Alameda Research, and their executives,” on its exchange after contacting authorities.
In a Twitter post on November 13, Kraken said the accounts were frozen “to protect their creditors” and added that it “retains full reserves” and other users’ funds are not affected, likely trying to allay user fears rowing that the exchange may experience liquidity issues as a result of the fund freeze.
Kraken spoke to law enforcement about a handful of accounts owned by the bankrupt FTX Group, Alameda Research and their executives. These accounts have been frozen to protect their creditors.
Other Kraken customers are not affected. Kraken maintains full reserves.
— Kraken Exchange (@krakenfx) November 13, 2022
A spokesperson for Kraken told Cointelegraph that it was “actively monitoring recent developments with the FTX estate” and “is in contact with law enforcement” and said it had frozen account access to certain funds “which we suspect are associated with ‘fraud , negligence or misconduct’ related to FTX.”
“We will resolve each account on a case-by-case basis and may seek guidance from the Bankruptcy Court or trustee as appropriate,” the spokesperson added.
Kraken’s account freeze comes after crypto exchange FTX announced on November 11 that FTX Group consisting of around 130 companies, including its sister trading firm Alameda Research, had filed for Chapter 11 bankruptcy in the US with its founder, Sam Bankman-Fried, who resigned as CEO.
It also follows a suspected hack on FTX that involved a Kraken account, Kraken Chief Security Officer Nick Percoco said on Nov 12 that they are aware of the account owner’s identity and later a update that FTX would make a statement about the situation “and their use of funds from their verified [Kraken] account to complete this transaction.”
Related: FTX Crash: The Crypto Industry’s Lehman Brothers Moment
Amid the recent turmoil, regulators appear to be coming down hard on FTX and their executives.
FTX is headquartered in the Bahamas and the country’s securities regulator froze the assets of FTX Digital Markets – the exchanges’ Bahamian subsidiary – and its “related parties” on November 10.
The Bahamian securities regulator on November 12 denied that it had instructed FTX to prioritize withdrawals from Bahamas-based users after the exchange stated on November 11 that it had been instructed by the country’s regulators to facilitate Bahamian withdrawals.
While FTX is now being investigated by the Royal Bahamas Police Force for possible criminal misconduct according to a November 13 report.