Payward, Inc., the parent company of crypto exchange Kraken, filed a second amended complaint on May 4, 2026, in the U.S. District Court for the District of Colorado, accusing custody firm Etana Custody Limited and its CEO Dion Brandon Russell of misappropriating more than $25 million in client funds.

The complaint characterises Etana's custody operation as a "Ponzi-like enterprise" and escalates what began as a breach-of-contract dispute into allegations of fraud, civil theft, and the falsification of account statements.

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What Payward Alleges

The core allegation is straightforward: Etana did not keep client reserve funds segregated, as standard custodial practice requires.

According to the complaint, the firm instead commingled those funds, spent a portion on operating expenses, and deployed at least $16 million into promissory notes issued by a company called Seabury Trade Capital. Seabury subsequently defaulted. Those funds were never returned. Details about Seabury Trade Capital remain limited at the time of publication.

Payward further alleges that Etana conducted risky foreign-exchange hedging using client money while keeping any income generated from those trades.

When earlier investments turned sour, the complaint claims Etana covered shortfalls by drawing on new client deposits rather than acknowledging losses. That cycle, Payward argues, is structurally identical to a Ponzi scheme.

The crisis came to a head in April 2025, when Kraken attempted to withdraw approximately $25 million in reserve funds it held with Etana. The company stalled, citing what Payward describes as fabricated reconciliation problems.

Colorado financial regulators subsequently issued a cease-and-desist order against Etana and raised its capital requirements.

By November 2025, the firm had entered court-supervised statutory liquidation. A court-appointed receiver now controls its remaining assets.

Payward is seeking at minimum $25 million in compensatory damages. Under Colorado's civil theft statutes, the court could award treble damages, bringing potential total liability above $75 million. The case number is 1:2025cv02829.

Neither Etana, Russell, nor the court-appointed receiver had issued a public statement as of publication.

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A Partnership That Spanned 180 Countries

Founded in 2014 and registered as a trust company in Wyoming, Etana operated across more than 100 countries before its collapse. The firm served as Kraken's primary fiat on-ramp partner from July 2019 onward, processing deposits and withdrawals in US dollars, euros, Canadian dollars, British pounds, and Japanese yen for Kraken's Intermediate and Pro clients in roughly 180 countries.

Users could deposit local currency and have it converted into Kraken-supported denominations, a feature that made the arrangement particularly important for people in markets without direct banking access to major exchanges.

Kraken entrusted Etana with hundreds of millions of dollars over the course of the partnership, according to CoinDesk's reporting.

Etana had positioned itself as a regulated, compliance-focused operator, boasting offices across New Zealand, Singapore, Japan, Europe, and the United States. Its Wyoming trust company registration was the regulatory foundation on which partners like Kraken were expected to rely for the segregation of client assets.

In April 2023, the firm partnered with hardware wallet maker Ledger to pursue institutional clients, marketing custody, governance, and compliance as an integrated offering. The contrast between that institutional positioning and the conduct now alleged in court is a central tension in Payward's complaint.

As recently as May 2025, Etana was meeting with SEC staff, even as its financial position had apparently already deteriorated.

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Why Emerging-Market Users Should Pay Attention

For crypto users in Sub-Saharan Africa and South Asia, this case is not a distant corporate lawsuit. It is a direct illustration of counterparty risk embedded in the fiat infrastructure that connects local currencies to global crypto markets.

Etana's fiat rails were a primary route through which users in markets like Nigeria, Kenya, India, Bangladesh, Sri Lanka, and Pakistan could move money on and off Kraken.

Those users had little to no visibility into how their funds were being managed on the custodial side, and they have limited legal recourse in a Colorado court.

The collapse of CBEX in April 2025, a fraudulent trading platform that caused millions in losses predominantly borne by African retail investors, followed a structurally similar pattern: commingled funds, false balances, and new deposits used to cover old losses. The difference here is that Etana was an ostensibly regulated US trust company with institutional partners.

These cases sit within a broader pattern of custodial risk across the industry. By mid-2025, crypto theft and fraud had reached $2.17 billion according to industry trackers, with FBI-reported losses up 22 percent year-over-year. The February 2025 Bybit hack was among the incidents contributing to that total.

Sub-Saharan Africa received approximately $205 billion in on-chain value between July 2024 and June 2025, a 52 percent year-over-year increase, according to data cited in Ripple's 2026 report and sourced to Chainalysis. The region is among the fastest-growing in crypto adoption globally.

The custodial infrastructure connecting those users to international markets now faces intensified regulatory scrutiny. South Africa is preparing to bring crypto assets under its exchange control regime. Kenya enacted virtual asset legislation in October 2025. Nigeria formally classified digital assets as securities under its 2025 Investments and Securities Act. In South Asia, India has introduced a tax deduction at source framework for crypto transactions and is developing guidelines for virtual asset service providers, signalling similar concerns about oversight of the custodial layer.

Analysts and advocates for local oversight are likely to cite the Etana case as a concrete example when pushing for stricter local supervision of custodial arrangements in each of those jurisdictions.

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The Case for Self-Custody, Reinforced

On-chain data adds another dimension to the story. Ethereum holdings on centralised exchanges fell to historic lows, around 8.97 million ETH, as of March 2025, reflecting a broad industry shift toward self-custody.

Kraken itself voluntarily adopted proof-of-reserves reporting after the FTX collapse in 2022.

Etana apparently applied no equivalent standard to its own fiat liabilities.

For developers building fiat-to-crypto infrastructure for African or South Asian users, the case is a reminder that due diligence on custodial partners must include proof-of-reserves verification, confirmation that client funds are legally segregated, and independent assessment of a partner's regulatory standing.

A regulated designation is not a substitute for that verification.

The next significant development in the case will likely come from the Colorado court as the receiver works to recover and distribute remaining assets. Verse Press will update this story as proceedings advance.