Kraken Sues PowerTrade, Alleging Misappropriation of More Than $7 Million in Assets

The case involves Bulgarian national Rossen G. Iossifov, who was sentenced by a federal court in Kentucky in 2021 over an auction fraud scheme and ordered to forfeit cryptocurrency held on the Kraken exchange. The case exposes a gap between judicial seizure orders and effective control of digital assets. Even after a court issues a forfeiture order, a prisoner may retain control through external channels until the government transfers the funds to an official wallet, raising concerns among financial regulators.

U.S. federal prosecutors recently charged Iossifov with conspiring to illegally transfer and launder about $290,000 from the Kraken account while serving his sentence in January 2024, despite the court’s forfeiture order. The funds were routed through multiple exchanges and crypto mixers to conceal their trail before ultimately being converted into fiat currency at an overseas bank. If convicted of money laundering involving the violation of the forfeiture order and transfer of the assets, Iossifov faces up to 25 additional years in prison.

Kraken parent Payward hired Mazars USA to audit its 2022 financial statements, but the firm withdrew in December 2023 when the audit was nearing completion. The dispute raises questions about crypto companies’ access to essential services such as banking and auditing. Kraken alleges the withdrawal was part of the regulatory pressure campaign it calls “Operation Chokepoint 2.0,” but that remains a company allegation.

Payward announced on July 7, 2026, that an arbitrator had ordered Mazars USA to pay $22 million for operational and financial losses caused by the unfinished audit. Payward petitioned the Delaware Court of Chancery the same day to confirm and enforce the award. Kraken said Mazars had found no fraud, concerns about management integrity or material disagreements during the audit.