Payward wins $22 million arbitration against Mazars in Kraken audit dispute

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Payward wins $22M arbitration

Highlights

Payward seeks Delaware Chancery Court judgment to confirm a $22 million arbitration award against Mazars USA over its abrupt exit from a nearly complete Kraken audit.
Mazars withdrew during Operation Choke Point 2.0 in 2022, citing regulatory uncertainty and the SEC’s now-dismissed complaint against Kraken, prompting reputational harm and legal costs for Payward.
Payward leverages the dispute to advocate for the Clarity Act, which aims to clarify SEC and CFTC jurisdiction amid ongoing Senate committee debates impacting U.S. crypto industry infrastructure.

Delaware judgment push after arbitration award

As reported by The Block, citing Payward in a blog post published Tuesday, the company is asking the Delaware Court of Chancery to enter final judgment on a $22 million arbitration award against former auditor Mazars USA. Payward says Mazars abruptly withdrew from a nearly finished audit of Kraken during the height of Operation Choke Point 2.0 in 2022.

Payward co-CEO Arjun Sethi says the auditor's exit causes reputational damage and forces the company to spend years and millions of dollars in legal fees to clear its name. In the post, he says Mazars confirms in writing when it withdrew that it had no disagreement with management, no integrity concerns and no findings of fraud.

Sethi argues that an audit is essential infrastructure for a crypto company because banking relationships, licenses, counterparties and regulators depend on it. He says the withdrawal leaves the firm under a cloud it does not create, even though the audit was close to completion.

Regulatory pressure and wider crypto implications

Sethi links Mazars' decision to the broader U.S. policy environment that the crypto sector describes as Operation Choke Point 2.0, a term used for what the industry views as unofficial pressure on banks and service providers after the collapse of FTX. He says banking regulators including the Federal Reserve, FDIC and OCC issue a joint letter in January 2023 warning banks about safety and soundness risks tied to crypto relationships, while the FDIC sends at least 25 letters to 24 banks urging them to pause or avoid expanding crypto activity.

He also says Mazars cites uncertainty from legal developments, including the Securities and Exchange Commission's complaint against Kraken, when it ends the audit engagement. Payward notes that the SEC complaint against Kraken is later thrown out after Gary Gensler steps down, alongside most of the agency's other crypto-related enforcement actions.

Beyond the court filing, Payward is using the dispute to press for passage of the Clarity Act, which would define regulatory boundaries between the SEC and the Commodity Futures Trading Commission for the crypto industry. The bill is currently under debate in Senate committees, and Sethi says the larger issue is ensuring founders, developers and customers do not have to fight for basic business infrastructure in the U.S.

Our earlier coverage of Coinbase’s UK FCA authorization highlighted how the company is expanding beyond crypto into equities and derivatives as it looks for new revenue streams. We also noted that COIN was trading in a volatile, range-bound setup with mixed technical signals and ongoing selling pressure, alongside attention on indicators that may reflect U.S. institutional sentiment.

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