Payward secures the award after the auditor abandoned a nearly completed audit in 2022, under pressure from Operation Choke Point 2.0.
Payward, the parent company of Kraken, has obtained a $22 million arbitration award against Mazars USA, the auditor that in 2022 abandoned a nearly completed audit without any professional findings against the client. Payward has now asked the Delaware Court of Chancery to convert the award into a final judgment.
Co-CEO Arjun Sethi recounted the events in a post on the Kraken blog: “An audit is not a favour. It is oxygen. When your auditor withdraws without finding anything against you, you inherit a shadow you did not create and pay to clean a name that was never dirty.” According to Sethi, Mazars cited “uncertainty and risks arising from legal developments” – including the SEC proceeding against Kraken – as the reason for withdrawal.
The backdrop is Operation Choke Point 2.0, the term coined by venture capitalist Nic Carter to describe the Biden administration’s campaign to cut the digital asset sector off from access to banking and professional services. Sethi documents that the FDIC sent at least 25 letters to 24 banks asking them to pause or not expand activities related to digital assets; the Federal Reserve and the OCC joined with a joint letter in January 2023, raising safety-and-soundness concerns about institutions operating with companies in the sector. The Clarity Act now before the Senate also emerged as a response to this regulatory gap.
Mazars had already withdrawn from the entire digital asset proof-of-reserves market in 2022. Its exit from the Kraken engagement came while the SEC, then led by Gary Gensler, was proceeding against dozens of sector operators. The SEC proceeding against Kraken was subsequently dismissed following Gensler’s resignation, along with most of the other digital asset enforcement actions initiated during that period.
Sethi stresses that the reputational damage was concrete and documented: the absence of a certified audit undermines banking relationships, licences, and counterparty arrangements. “No founder, no developer, and no customer should ever need to win an arbitration to prove they deserve a bank account and an auditor,” he wrote. Meanwhile, Operation Choke Point 2.0 itself has largely dissolved: the new administration has revoked the restrictive guidance and opened investigations into cases of unjustified debanking.
