What is Kraken: The Scandals and Successes of the Exchange
In the fast-paced world of cryptocurrencies, few exchanges have endured as successfully as Kraken. While many platforms have come and gone, Kraken has weathered crises and regulatory challenges, solidifying its reputation as a trusted and influential player in the crypto trading space.
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Founded nearly 15 years ago, Kraken has earned its place as one of the most secure and compliant crypto platforms, maintaining a strong presence in the US and European markets.
Throughout its history, Kraken has experienced rapid growth, internal conflicts, and major industry shifts.
While it may sound cliché, the story of this crypto exchange is genuinely filled with triumphs and controversies. But one thing remains constant: Kraken hasn’t just survived—it has continuously found ways to thrive, even amid the crypto market volatility.
The Origins of Kraken
Kraken was founded by Jesse Powell, along with Thanh Luu and Michael Gronager, in July 2011, shortly after the notorious hack of Mt. Gox, which was then the world’s largest crypto exchange.
Having witnessed the Mt. Gox incident firsthand, Powell recognized the urgent need for a more secure and reliable crypto platform.
After a period of development and extensive testing, Kraken officially launched in September 2013, debuting with Bitcoin and Litecoin trading pairs against the euro.
Kraken’s early commitment to security and reliability helped it earn user trust. This focus proved invaluable in 2014 when the crypto exchange was called upon to help track down the missing bitcoins from Mt. Gox and assist in the investigation of its bankruptcy.
As Kraken expanded, it introduced margin trading and advanced order types in 2014. A year later, it launched the first-ever Bitcoin dark pool*, allowing large traders to execute orders anonymously.
*Dark pool is a private, off-exchange trading platform for digital assets, enabling orders to be placed without public visibility. This is especially useful because large buy or sell orders can significantly impact market prices.
In 2015, Kraken became the first exchange in the world to list Ether (ETH), the native cryptocurrency of Ethereum, which is now the second-largest blockchain by market cap. By 2017, Kraken expanded its support for multiple fiat currencies, solidifying its status as the top crypto exchange for euro trading volume.
Jesse Powell’s vision has always been clear:
We set out to build the most secure and reliable exchange, and we continue to double down on that mission.
Kraken: Expansion Through Acquisitions
Kraken has consistently expanded its market presence through strategic acquisitions.
In 2016, it acquired Coinsetter (a New York-based cryptocurrency platform) and Cavirtex (Canada’s first crypto exchange), strengthening its position in the North American market.
In Europe, Kraken acquired the Dutch exchange CleverCoin, and Glidera, a platform for managing crypto wallets.
In 2017, Kraken acquired Cryptowatch, a platform for trading chart analysis, which greatly enhanced its user interface.
The cryptocurrency boom of 2017 fueled explosive growth for Kraken. The crypto exchange registered up to 50,000 new users daily by the end of the year.
One of Kraken’s most impactful acquisitions came in 2019 when it bought Crypto Facilities, a UK-based startup and a regulated platform for futures trading in Europe. This move positioned Kraken as the only crypto exchange in the region offering regulated futures contracts.
However, Kraken’s attempts to expand into Japan faced significant challenges. In 2018, the exchange announced its exit from the Japanese market, citing rising compliance costs. Two years later, Kraken re-entered Japan but withdrew once again in early 2023, pointing to unfavorable market conditions.
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These strategic decisions reflect Kraken’s pragmatic approach: the crypto exchange is quick to enter promising markets but isn’t afraid to pull out when regulatory requirements become too burdensome.
Financial Growth and Market Position
Kraken’s revenue has always mirrored the volatility of the crypto market. In 2017, during the bull run, the crypto exchange’s revenue surged from $16 million in 2016 to $160 million.
In 2021, amid another crypto boom, Kraken processed over $624 billion in transactions, generating around $2 billion in revenue.
However, the bear market of 2022 hit hard: revenue dropped to $954 million, and by 2023, trading volume had fallen to $221 billion, bringing revenue down to $670 million.
In 2024, Kraken made a strong recovery. The exchange recorded a trading volume of $665 billion, marking a 148% increase compared to the previous year. Revenue grew by 128%, reaching $1.5 billion. With over 13 million customers globally, Kraken continues to expand its footprint, with a strong focus on institutional services and security.
Kraken’s strong 2024 performance reflects the company’s resilience and ability to capitalize on market opportunities,
the Sacra Analytics report reads.
Analysts have pointed out that Kraken has gradually but firmly established itself as one of the leading crypto exchanges and a key gateway for new money entering the industry.
However, as its financial growth continues, Kraken faces heightened attention from regulators and new security challenges.
Security Incidents and Ethical Controversies
Kraken is justifiably proud of its track record, having never experienced a major hack. Unlike many other crypto exchanges, the platform has maintained an impeccable reputation for cybersecurity.
That said, there have been some incidents.
In 2023, a group of security researchers identified a bug in Kraken's system that allowed users to artificially inflate their balances.
The researchers withdrew nearly $3 million before reporting the vulnerability. However, instead of returning the funds immediately, they demanded a reward. Kraken, viewing this as extortion, froze the transfers.
The incident led to intense debate. Some experts argued that the researchers were engaging in ethical hacking, while others considered their actions to be theft.
Kraken quickly patched the vulnerability and reassured users that their funds were not compromised.
We take security seriously and will not tolerate unauthorized access under the guise of ‘research,’
said a Kraken representative.
While client assets remained unaffected, the incident sparked a debate within the crypto community about potential risks, even on the most secure platforms.
Kraken responded swiftly, reaffirming its reputation as an exchange with a transparent and strict security policy.
Internal Conflicts and Leadership Changes
While Kraken stands strong against external threats, it has faced significant internal corporate conflict.
In 2022, the crypto exchange’s founder, Jesse Powell, introduced a controversial Company Culture Document.
In the document, Jesse Powell:
- Banned political discussions within the company.
- Set strict behavioral standards for employees.
- Offered a four-month severance package to those who disagreed with the Company Culture Document (essentially, showing them the door).
This initiative sparked significant criticism. Some employees accused Powell of fostering a toxic work environment and suppressing freedom of expression.
As a result, the controversy led to Jesse Powell stepping down as CEO later that year, with Kraken’s Chief Operating Officer, Dave Ripley, taking over leadership.
The exchange also underwent executive reshuffling, replacing the heads of its finance and marketing departments.
However, despite stepping down as CEO, Powell remains Kraken's largest shareholder, retaining significant influence over the exchange's strategic development.
What’s Next for Kraken?
Despite a series of scandals and controversies, Kraken remains one of the leading crypto exchanges today.
In 2024, the company took several key strategic steps:
- Launched Kraken Wallet, a mobile app for self-custody of crypto assets.
- Expanded its institutional services, attracting large clients.
- Introduced a transparent roadmap for new listings, enhancing communication with users.
Will Kraken IPO?
Many analysts view Kraken as one of the leading candidates for an eventual stock market listing.
If U.S. regulation improves, Kraken could unlock billions in enterprise value by going public,
said Chris Tyrer, Head of Institutional Bullish, a competing crypto exchange.
However, for this to happen, Kraken must maintain a high level of security. Even minor vulnerabilities could undermine user trust.
The competition with Binance and Coinbase remains tough, but Kraken’s emphasis on transparency and regulatory compliance could give it an edge.
Today, Kraken is at a crossroads: should it continue as an independent stronghold of security and compliance, or should it go public and expand its influence?
Either way, Kraken’s impact on the crypto market is far from over.
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