In a significant legal triumph, Payward, the parent company behind leading cryptocurrency exchange Kraken, has secured a substantial $22 million arbitration award against its former auditor, Mazars USA. This decisive victory comes after Mazars abruptly withdrew from a nearly completed audit, an act Kraken asserts inflicted severe reputational damage at the peak of what the crypto industry critically dubs "Operation Choke Point 2.0."
A Stinging Rebuke to Auditor Abandonment
Kraken's co-CEO, Arjun Sethi, underscored the vital role of an audit, likening it to "oxygen" for a business, essential for banking relationships, licensing, and regulatory compliance. In an impassioned open letter, which also serves as a rallying cry for comprehensive U.S. crypto regulatory reform, Sethi recounted how Mazars, after three years of providing clean opinions, inexplicably abandoned Kraken's third audit just days before its scheduled completion in December 2023. Remarkably, Mazars confirmed in writing that it had no disagreements with management, no concerns regarding the company's integrity, and detected no fraud before its departure.
Unpacking "Operation Choke Point 2.0"
The core of Kraken's grievance ties directly into the contentious "Operation Choke Point 2.0," a term widely used by critics to describe an alleged informal campaign by the Biden administration. This campaign, they contend, aimed to pressure traditional financial institutions into severing ties with the cryptocurrency sector following the dramatic collapse of FTX. Sethi explicitly linked Mazars' withdrawal to this broader climate of regulatory hostility, suggesting the auditor bowed to pressure as serving the crypto industry became "politically costly." This sentiment is reinforced by Mazars Group's earlier decision in December 2022 to halt all proof-of-reserves work for the entire crypto sector.
This alleged campaign manifested through various channels: a joint statement issued on January 3, 2023, by the Federal Reserve, FDIC, and OCC, which cautioned banks about crypto risks; numerous FDIC "pause letters" reportedly instructing lenders to delay or cease crypto activities; and an aggressive enforcement posture by the SEC under former chair Gary Gensler, which saw dozens of crypto firms, including Kraken, face lawsuits and investigations.
Regulatory Shifts and the Push for Clarity
Significantly, the SEC's lawsuit against Kraken itself was ultimately dismissed with prejudice in March 2025, without penalties or admission of wrongdoing. This dismissal marked a broader recalibration as the regulatory landscape began to shift, particularly after Gensler's departure and a change in presidential administration. "Operation Choke Point 2.0" has largely decelerated, with earlier guidance being rolled back and authorities now examining instances of "wrongful debanking."
Sethi also detailed other instances of perceived pressure, including a March 2023 raid on co-founder Jesse Powell's home over an unrelated dispute, an investigation that concluded two years later with no charges. This cumulative experience strengthens Kraken's advocacy for the "Clarity Act," a proposed crypto market structure bill designed to delineate oversight between the SEC and the CFTC. Sethi argued that legitimate crypto businesses should not have to fight legal battles simply to access fundamental banking and professional services.
Broader Market Significance and Future Outlook
This $22 million arbitration award is more than just a financial win for Kraken; it represents a tangible pushback against what many in the digital asset space view as an orchestrated effort to marginalize the industry. It highlights the significant costs – both financial and reputational – that businesses incur due to regulatory ambiguity and perceived pressure campaigns. As the crypto industry continues its quest for mainstream acceptance and clear regulatory frameworks, this ruling could serve as a precedent, emphasizing accountability for professional service providers who abandon clients under political duress. The ongoing legislative journey of the Clarity Act underscores the industry's fervent hope for a more predictable and supportive operating environment in the United States.