Payward Interactive and Payward Trading have escalated the kraken lawsuit in Colorado, accusing former custody partner Etana Custody Limited and Etana Custody Inc. of misusing more than $25 million in customer money.
Summary
What the complaint alleges
The filing, submitted in Colorado federal court, names CEO Dion Brandon Russell and others. Payward says Etana commingled custodial assets with its own money and used the pool to cover operating expenses and make high-risk investments.
However, the complaint alleges that Etana kept sending false account reports that showed full balances while a funding gap widened. Payward argues that the company operated a Ponzi scheme-like structure by recycling incoming money to meet existing obligations.
April 2025 withdrawal dispute
The dispute intensified in April 2025, when Kraken tried to withdraw roughly $25 million from reserve funds. According to the filing, Etana delayed the payout by citing reconciliation issues that Payward calls fictitious.
Moreover, Payward says Etana relied on new deposits from other clients to cover the shortfall. The company also claims that at least $16 million of the gap was tied to a promissory note issued by Seabury Trade Capital, which later defaulted.
That said, the complaint argues that Etana could not satisfy withdrawal requests without fresh inflows once that note failed. The case adds to a wider customer funds dispute around the custody arrangement and the handling of reserve assets.
Regulatory pressure and liquidation
The legal fight comes after Colorado regulators issued a cease-and-desist order against Etana Custody Inc. In November 2025, a Denver County court appointed a liquidator/receiver to take control of the company’s assets under a statutory liquidation order.
As a result, Etana’s operations are described as effectively frozen. Claims are now handled through a court-supervised process rather than by management, while the Etana Custody case continues to draw scrutiny.
Damages sought by Payward
Payward is seeking at least $25 million in compensatory damages and treble damages under Colorado’s civil theft statute. That civil theft claim could lift the total request to more than $75 million before fees and interest.
In addition, the complaint alleges breach of contract, breach of fiduciary duty, fraud, and negligent misrepresentation. Payward says Etana marketed itself as a segregated, bankruptcy-remote custodian while allegedly deploying Kraken’s reserves into illiquid, high-risk credit bets.
In short, the complaint paints a sharp picture of alleged custodial failures, regulatory intervention, and a growing financial recovery battle tied to more than $25 million in missing funds.
