Kraken's parent company Payward has filed legal action against PowerTrade, alleging the high-leverage derivatives platform misappropriated $7.2 million in digital assets and unrealized gains through a series of unauthorized transactions that retroactively canceled profitable trades.
Market Context
The lawsuit comes as institutional cryptocurrency trading relationships face heightened scrutiny following the market downturn in October 2025 when bitcoin prices fell sharply. The case highlights risks in inter-exchange derivatives arrangements and the challenges exchanges face when attempting to withdraw funds from partner platforms during periods of market stress.
PowerTrade, operated out of El Salvador with operations based in the United Arab Emirates, has not responded to requests for comment. The firm was launched by co-founders Mario Gomez Lozada (CEO) and Bernd Sischka (CFO), according to court filings.
Analysis
According to Payward's legal filing, PowerTrade systematically moved Kraken's account from a positive balance of approximately $7 million to a deficit of nearly $2 million through roughly 100 unauthorized 'corrections.' These transactions targeted trades that had already expired or settled months earlier, artificially manufacturing a negative balance in Kraken's trading account.
Kraken began institutional cryptocurrency derivatives trading with PowerTrade in 2022. The relationship soured when bitcoin prices declined and markets weakened in October 2025. At that point, Kraken grew concerned about PowerTrade's liquidity and creditworthiness and attempted to withdraw its funds—only to find itself unable to do so.
Rather than return the assets, Payward alleges PowerTrade carried out unilateral transactions designed to strip more than $6 million from its account while creating fabricated debt obligations. The filing states Kraken is concerned PowerTrade would leverage this artificially created 'debt' to appropriate its bitcoin collateral.
"The discovery we seek will help Payward identify additional assets to freeze and ensure that bad actors like PowerTrade are not able to harm others in the industry," Kraken said in a statement confirming the legal action. The exchange has already secured an interim worldwide freezing order from the Dubai International Financial Centre (DIFC) Courts against PowerTrade and its co-founders, with additional proceedings underway in other jurisdictions.
Key Numbers
- $7.2 million: Total digital assets and unrealized gains allegedly misappropriated by PowerTrade
- ~$7 million to -$2 million: The swing from Kraken's positive balance to deficit via unauthorized corrections
- 100+: Number of unilateral 'correction' transactions PowerTrade executed against Kraken's account
- October 2025: When bitcoin prices fell and Kraken first attempted to withdraw funds from PowerTrade
What to Watch
Payward's federal court application seeking discovery from U.S.-based financial institutions regarding PowerTrade and its co-founders. The outcome of the DIFC Courts' worldwide freezing order proceedings will determine whether additional assets can be frozen. Any response or counter-claims from PowerTrade's co-founders Gomez Lozada and Sischka could reshape the legal landscape of this dispute, which may set precedent for how inter-exchange derivatives relationships handle fund custody during market downturns.