- The cryptocurrency exchange Kraken is being sued for $900,000 in unpaid work by former manager Jonathan Silverman
- The Lawsuit also charges the exchange of illegally operating in New York despite officially ceasing its operation there years back
- A representative for the exchange denied any wrongdoing
Kraken, a United States based exchange and one of the oldest crypto institutions, founded in 2011, has recently been sued by a former employee for a whopping $900,000 as reported by Bloomberg. Jonathan Silverman, who was hired as a manager for Kraken’s institutional sales and trading desk in the exchange’s New York office claims that the firm hasn’t paid him for his work and demands compensation.
Alleged oral agreement at the root of the conflict
Silverman filed a lawsuit on the 4th of April, 2019 in New York based on an agreement that he had allegedly reached with the founder of the firm Jesse Powell, who reportedly offered him a $150,000 salary and also orally agreed to pay him a 10 percent commission of the trading desk’s annual profit when he was hired back in 2017. According to Silverman, the trading desk generated more than $19 million in profits but he never received the salary nor the commission. Christina Vee, a spokeswoman for Kraken said Silverman “is both lying and in breach of his confidentiality agreement.”
Another interesting fact to this case is that Kraken is one of the exchanges that sets the prices for CME Group Inc.’s Bitcoin futures contract and founder Jesse Powell has said that the firm doesn’t have to abide by New York rules because the firm hasn’t operated in the state for years. Powell also tweeted, back in 2018:
“We made the wise decision to get the hell out of New York three years ago.”
Former employees raise questions
The company also made an official announcement on their blog in 2015 in an article titled “Farewell, New York” because of the vigorous requirements of the state’s BitLicense, a regulatory framework required by the Department of Financial Services for virtual currency businesses.
These factors have been challenged in Silverman’s lawsuit which states that Kraken had been “misrepresenting to the public and government regulators that it was not operating in New York; when in reality, Kraken’s OTC practice, and OTC trading (including logging into the Kraked exchange and negotiating wire transfers) occurred almost exclusively in New York,” the lawsuit read.
According to a separate lawsuit brought against the company by former employee Robert Adler, the company’s New York trading desk is thought to have made a profit of 19 million dollars between September of 2015 and year end of 2017. Richard Johnson, an analyst at Greenwich Associates who specializes in blockchain technology called the alleged mal practice as a “dirty little secret of the crypto exchange world.”
David Silver, one of the attorneys representing Silverman, said in an emailed statement:
“Just because some people in cryptocurrency space don’t believe the rules apple to then doesn’t mean that’s the way things actually work.”
After Silverman left the institution, the company reached an agreement with him about a settlement of $907,631, which would be paid in full. The lawsuit states that the firm “refused” to pay. Silverman was one of at least two allegedly employed at kraken’s New York office.