Kraken Parent Sues Etana, Alleges Custodian Misappropriated $25M

Payward Inc., the parent company of cryptocurrency exchange Kraken, filed a lawsuit in U.S. District Court in Colorado against Etana Custody and its CEO, Dion Brandon Russell. The complaint seeks repayment of $25 million, plus interest and attorney fees, and accuses the custodian of misappropriating client funds.

Payward engaged Etana to act as custodian for Kraken client funds and entrusted the company with hundreds of millions of dollars, the filing states. When Kraken requested the return of client assets, Etana failed to return $25 million.

Through discovery, Payward's filing states it found the shortfall “was not the result of mere mismanagement or poor recordkeeping” but instead reflected a “Ponzi-like enterprise that depended on the continuous flow of new customer deposits.”

The complaint alleges Etana commingled client funds and used some assets to cover operating expenses and to finance higher-risk investments. Payward added a fraud claim against Etana and Russell and is seeking the $25 million plus interest and legal fees.

Court papers state legal representatives for Etana and Russell dispute the allegations. The Colorado Banking Board placed Etana into liquidation in November 2025 after determining the custodian could not meet capital requirements. Payward expanded its complaint following the liquidation and discovery.

Etana operates as a digital-assets custodian that provides third-party custody services to crypto platforms and their clients. Payward's complaint characterizes the matter as a breach of trust and misappropriation of client assets under the custody agreements.

The filing does not provide a full accounting of how the missing funds were used or identify other counterparties involved in the transactions, court documents show. Etana's liquidation may affect creditors' ability to recover assets and the litigation will address liability and claim priority.

The complaint is pending in the U.S. District Court in Colorado.