Key Takeaways
- • Payward, parent company of crypto exchange Kraken, filed a second amended complaint in U.S. District Court in Colorado alleging Etana Custody and CEO Dion Brandon Russell misappropriated over $25 million in client funds through a "Ponzi-like" scheme involving commingling and misuse of custodial assets.
- • Kraken claims it entrusted Etana with hundreds of millions of dollars as part of a fiat on-ramp partnership over several years, but when attempting to withdraw approximately $25 million in reserve funds in April 2025, Etana allegedly stalled with fabricated reconciliation issues and lacked sufficient funds to meet the request.
- • According to the complaint, Etana operated the scheme by commingling custodial assets, spending funds on operating expenses and risky investments, falsely reporting reserves as intact to clients, and relying on new deposits to cover shortfalls—a structure consistent with Ponzi scheme mechanics.
- • Etana Custody is currently undergoing court-supervised liquidation in Colorado, suggesting the firm's operational collapse and regulatory intervention.
- • Matt Turetzky, head of litigation at Kraken, stated the exchange will pursue the case aggressively: "We did not get here by rolling over. If you take our money or deceive our customers, then know this: we will find you, we will sue you, and we will not stop until justice has been served."
Summary
Payward, the parent company of major crypto exchange Kraken, has filed a second amended complaint in U.S. District Court in Colorado on May 4, 2026, alleging that its former custody partner Etana Custody and CEO Dion Brandon Russell engaged in fraud involving the misappropriation of over $25 million in client funds. The complaint characterizes the operation as a "Ponzi-like" scheme in which custodial assets were commingled, diverted to operating expenses and risky investments, and misrepresented to clients as secure and intact.
Kraken's relationship with Etana involved a substantial fiat on-ramp partnership in which the exchange entrusted Etana with hundreds of millions of dollars over several years. The fraud allegedly unraveled in April 2025 when Kraken sought to withdraw approximately $25 million in reserve funds. According to the complaint, Etana responded with what Kraken characterizes as fabricated reconciliation issues and misleading explanations to delay the withdrawal. The core allegation is that Etana simply lacked the funds to fulfill the request and instead relied on inflows from new client deposits to cover shortfalls—a classic hallmark of Ponzi scheme mechanics.
Etana Custody is currently undergoing court-supervised liquidation in Colorado, indicating the firm has already collapsed operationally and is subject to formal insolvency proceedings. This context underscores the severity of the alleged fraud and the institutional damage to affected parties. Etana did not respond to requests for comment by publication time.
Matt Turetzky, head of litigation at Kraken, issued a forceful statement reflecting the exchange's commitment to pursuing the matter: "Kraken has millions of users and hundreds of billions of dollars in quarterly transaction volume. We did not get here by rolling over. If you take our money or deceive our customers, then know this: we will find you, we will sue you, and we will not stop until justice has been served." This litigation represents one of several high-profile custody-related disputes in the crypto sector, where operational failures and fraud continue to pose material risks to institutional participants relying on third-party custodians.
Kraken's relationship with Etana involved a substantial fiat on-ramp partnership in which the exchange entrusted Etana with hundreds of millions of dollars over several years. The fraud allegedly unraveled in April 2025 when Kraken sought to withdraw approximately $25 million in reserve funds. According to the complaint, Etana responded with what Kraken characterizes as fabricated reconciliation issues and misleading explanations to delay the withdrawal. The core allegation is that Etana simply lacked the funds to fulfill the request and instead relied on inflows from new client deposits to cover shortfalls—a classic hallmark of Ponzi scheme mechanics.
Etana Custody is currently undergoing court-supervised liquidation in Colorado, indicating the firm has already collapsed operationally and is subject to formal insolvency proceedings. This context underscores the severity of the alleged fraud and the institutional damage to affected parties. Etana did not respond to requests for comment by publication time.
Matt Turetzky, head of litigation at Kraken, issued a forceful statement reflecting the exchange's commitment to pursuing the matter: "Kraken has millions of users and hundreds of billions of dollars in quarterly transaction volume. We did not get here by rolling over. If you take our money or deceive our customers, then know this: we will find you, we will sue you, and we will not stop until justice has been served." This litigation represents one of several high-profile custody-related disputes in the crypto sector, where operational failures and fraud continue to pose material risks to institutional participants relying on third-party custodians.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.