Kraken Parent Payward Sues Former Custody Partner Etana Over Alleged $25 Million Client Fund Fraud

Image credit: Unsplash

Payward, the parent company of crypto exchange Kraken, has filed a second amended complaint in the U.S. District Court in Colorado accusing Etana Custody and its CEO, Dion Brandon Russell, of misappropriating more than $25 million in client funds. The lawsuit, filed April 4, alleges custodial assets were commingled, spent on operating expenses and risky investments, and falsely reported to customers as fully intact.

Kraken Alleges Etana Blocked $25 Million Withdrawal With False Explanations

According to the complaint, Payward entrusted Etana with a substantial volume of client funds over multiple years as part of a fiat on-ramp partnership. When Kraken sought to withdraw roughly $25 million in reserve funds in April 2025, the exchange alleges Etana responded with fabricated reconciliation issues and misleading explanations. 

Kraken’s complaint alleges that Etana lacked sufficient funds to fulfill the withdrawal and instead used incoming deposits to cover the shortfall. Etana did not respond to a request for comment ahead of publication. Matt Turetzky, Kraken’s head of litigation, said the exchange intends to pursue the case fully: 

“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.”

Complaint Details Alleged Misuse of Funds Including Defaulted Promissory Notes

The lawsuit outlines several specific instances of alleged misuse. In one, Etana purportedly deployed at least $16 million of Kraken-related funds into promissory notes issued by Seabury Trade Capital, which later defaulted. Kraken claims those funds were never returned and may have been redirected to cover company expenses. In a separate instance, Etana is accused of using customer assets to finance a foreign-exchange hedging strategy while retaining associated investment income for itself. 

Throughout the period in question, Kraken alleges that Etana continued issuing account statements and dashboard updates showing customer balances as fully accounted for, despite internal shortfalls. The complaint also names Russell personally, alleging he exercised near-total control over Etana’s operations and directed both the misuse and concealment of funds.

Etana Entered Court-Supervised Liquidation in November After Colorado Cease-and-Desist

Regulatory pressure on Etana escalated in 2025, when Colorado authorities issued a cease-and-desist order and raised capital requirements. According to the complaint, Etana entered liquidation proceedings in November 2025 and is currently under the supervision of a court-appointed receiver. 

Kraken is seeking at least $25 million in compensatory damages, along with potential treble damages under civil theft claims, injunctive relief and attorneys’ fees. Etana’s collapse follows a series of crypto firm failures involving allegations of misused client funds. Institutional lender Blockfills filed for bankruptcy in March after halting withdrawals and reporting roughly $75 million in losses. The case is ongoing in the U.S. District Court in Colorado.