On Monday, the U.S. Securities and Exchange Commission sued one of the world’s largest cryptocurrency exchanges, which accused it of illegally operating as a securities exchange without first registering with the regulator. The San Francisco federal court lawsuit against Payward Inc. and Payward Ventures, which operate Kraken, alleges that the firm turned a blind eye to securities laws designed to protect investors and commingled customer funds with its own. Kraken denies the allegations and says it intends to defend its position vigorously.

The SEC claims Kraken made hundreds of millions of dollars by facilitating the trading of digital assets such as crypto tokens, coins, and Ethereum-based derivatives. The regulatory body contends the company has acted as an unregistered securities exchange, broker, dealer, and clearing agency since 2018. The regulator also alleges that the firm’s business practices and deficient internal controls led to a “significant risk of loss” for customers. For example, it says the firm sometimes paid operational expenses directly from accounts holding customer cash. The SEC is seeking a court order to prevent Kraken from acting as an unregistered securities exchange and disgorgement of ill-gotten gains plus interest and penalties.

• Latest News: Collaboration Announced: China’s Nio and Changan Automobile to Develop Electric Vehicles (EVs) Together

In a blog post, Kraken said it had not committed fraud or market manipulation and that the SEC’s case was flawed from a legal standpoint. The company pointed out that a court ruling previously rejected the SEC’s legal theory that digital assets constitute investment contracts and require special registration. It also denied that it had commingled customer funds, asserting that the SEC was mischaracterizing the use of fees that the platform had already earned.

The SEC complaint identifies 16 cryptocurrencies it considers securities, including Cardano, Algorand, Polygon, and Sola. It follows similar complaints against Kraken’s competitors, Binance and Coinbase, earlier this year.

The SEC’s legal action is part of Chair Gary Gensler’s push to bring cryptocurrency under his agency’s purview. The SEC’s legal team has been investigating the industry for months, which it says is necessary to preserve investor protections. It believes that unregistered entities operate a substantial portion of the crypto marketplace. It also has been pushing to clarify how virtual assets are categorized under federal law. The SEC has filed several other legal actions targeting companies involved in the sector. In June, the agency sued Binance and Coinbase for allegedly offering unregistered securities. The regulator is currently in the process of examining more than 1,000 digital asset offerings. Those reviews will focus on whether the digital assets meet the legal definition of securities under federal law. The SEC will issue an official report on its findings next summer. The SEC’s recent push into the crypto arena is likely to put further pressure on trading platforms like Kraken to comply with the SEC’s regulations. That could lead to further scrutiny and potentially even regulatory enforcement actions against some of the country’s most popular cryptocurrency exchanges.