Kraken co-CEO Admits Quizzing Monero Buyers About Their Coins Was a Mistake
Key Takeaways
- •Kraken has retracted information requests sent to Monero buyers about their employer, funding sources, and plans for the coins, with co-CEO Arjun Sethi confirming no regulation required the questions.
- •The emails were prompted by an employee who viewed a young client holding a large sum as suspicious, a judgment Sethi publicly rejected as inconsistent with treating the person as a customer.
- •Kraken will continue conducting source-of-funds checks mandated by anti-money-laundering rules, and under its information request policy amended October 1, unanswered inquiries can lead to frozen deposits and trading, though withdrawals are unaffected.
- •XMR remains listed and tradable on Kraken, but the exchange does not accept XMR deposits or trades from European Economic Area and UK users, and users in Canada and Australia cannot deposit, hold, or trade the token.
- •The reversal occurred days after investigator ZachXBT identified FreedomXMR on Hyperliquid Core as a laundering channel, tracing about $20 million from exploit wallets and linking over 87% of its inflows to illicit activity.
Kraken co-CEO Arjun Sethi has acknowledged that the exchange was wrong to email Monero (XMR) buyers with questions about their employer, the source of their funds, and their plans for the coins. According to Sethi, no rule required the exchange to ask those questions, and Kraken has since withdrawn the requests. XMR remains listed on the platform.
Monero is a privacy coin designed to obscure transaction details on its blockchain. Unlike assets on transparent ledgers, its default shielding of senders, receivers, and amounts is what has made privacy coins a recurring focus of anti-money-laundering rules in the US and Europe.
A young client's wealth triggered the emails
Sethi laid out the timeline in a post on X. The email went to clients who had purchased XMR with their own money and then withdrew it.
“no rule required it,” Sethi wrote. He said an employee at the exchange saw a young client with a large amount of money and treated it as a red flag.
“that is not a red flag. that is our customer and client,” Sethi wrote, adding, “those requests are withdrawn and the clients have been told nothing is required of them.”
He said the question “what will you do with your coins” is unacceptable and has been removed. “where your money came from is a fair question. what you do with it after it leaves is not,” he wrote. Sethi closed the post by thanking critics for “the call out.”
Source-of-funds checks remain as XMR stays listed
Kraken said it may ask for source-of-funds showing where the money for a particular transaction came from, in line with anti-money-laundering laws. Origin checks of that kind are a standard AML obligation for centralized exchanges, while the withdrawn questions about how buyers planned to use their coins went beyond those requirements. Under the company's information request policy, recently amended on October 1, unanswered inquiries may result in frozen deposits and trading. Withdrawals are not affected.
“xmr stays listed. buy it here, take it home,” Sethi wrote.
XMR was down approximately 5% over 24 hours and traded around $581 on Kraken early Saturday. Kraken does not accept XMR deposits and trades from users in the European Economic Area and the UK, while users in Canada and Australia cannot deposit, hold, or trade the token.
The walk-back came days after on-chain investigator ZachXBT flagged FreedomXMR, a service on Hyperliquid Core, as a laundering venue, as Cryptopolitan reported. He traced some $20 million from exploit wallets to privacy coins through the service and said more than 87% of inflows to FreedomXMR were linked to illicit activity.
Most centralized exchanges limit XMR trading because of US or European rules. Those curbs reflect the friction between Monero's privacy design and the on-chain visibility that anti-money-laundering monitoring typically depends on. Separately, Payward, Kraken's parent company, signed an agreement on Oct. 14 to buy Lithuania-licensed Saldo Bank and secure an EU banking license, as previously reported by Cryptopolitan. The agreement is subject to regulatory approval and is expected to close in 2027.
