Kraken Parent Payward Accuses Etana of $25 Million Ponzi-Like Custody Fraud

Payward, the parent company of crypto exchange Kraken, has accused Etana Custody and its CEO of orchestrating a Ponzi-like scheme. The alleged fraud misappropriated more than $25 million in customer reserve funds.

The second amended complaint was filed May 4, 2026 in the U.S. District Court for the District of Colorado. It escalates earlier breach-of-contract claims into detailed fraud allegations against the trust company and chief executive Dion Brandon Russell.

Inside the Alleged Custody Fraud

Payward says Etana commingled Kraken customer reserves with company money. The complaint claims at least $16 million was funneled into Seabury Trade Capital notes.

Those notes later defaulted. The filing alleges Russell directed the misuse personally while issuing dashboard balances showing assets as fully secure.

Kraken requested a roughly $25 million withdrawal in April 2025. Etana stalled with what Payward calls fabricated reconciliation issues.

The firm lacked liquidity to return the funds. Etana was instead using incoming deposits to cover prior shortfalls, the filing alleges. The complaint characterizes the pattern as Ponzi-like.

Receivership Limits the Recovery

Etana entered statutory liquidation in November 2025 after Colorado regulators issued cease-and-desist and suspension orders. According to the court-appointed receiver, cash holdings stand at roughly $6.83 million. Liabilities exceed $26 million, most of which represents the Kraken claim.

The receiver is cooperating with Payward by producing documents and making former staff available.

Crypto holdings stored on Amazon Web Services were briefly inaccessible. AWS terminated the account over unpaid fees in March 2026.

The federal case is stayed against Etana entities but proceeds against Russell. He faces personal liability for fraud and civil theft. With the receiver opting against a vigorous defense, Payward’s recovery hinges on the claims process and any insurance proceeds.