Payward Inc., the parent company of Kraken, has won a $22 million arbitration award against Mazars USA after the auditing firm withdrew from a nearly completed audit in 2022, according to court filings. Payward is now asking the Delaware Court of Chancery to confirm the award, turning the arbitration decision into an enforceable court judgment.
The dispute centers on Mazars’ decision to walk away from its audit work during a period of heightened pressure on digital asset companies, a time that parts of the cryptocurrency industry later described as “Operation Choke Point 2.0.” Payward argued that Mazars abandoned the engagement despite finding no wrongdoing at the company and that the withdrawal caused reputational harm, operational disruption and additional costs.
The arbitration award represents one of the more concrete legal outcomes linked to claims that cryptocurrency businesses were damaged by the actions of banks, auditors and other service providers during the regulatory crackdown that followed the collapse of several major digital asset platforms. While the term “Operation Choke Point 2.0” has never been the name of a formal government program, it has become shorthand among crypto market participants for what they describe as coordinated or informal pressure on regulated financial firms to reduce exposure to the crypto sector.
Mazars has not been accused in the filings of acting under a direct government order. Instead, the case focused on whether the firm had a valid basis to terminate its audit relationship with Payward and whether its withdrawal breached contractual obligations. Payward said the decision came at a critical moment and carried damaging implications because audit relationships are central to the credibility and operations of financial businesses.
The filings show that Payward has asked the Delaware court to formalize the arbitration panel’s decision. If confirmed, the award would allow the company to pursue collection of the $22 million judgment and would mark a significant legal victory for one of the best-known U.S.-linked cryptocurrency platforms.
Why the audit dispute mattered
Audits are not routine background work for companies operating in financial markets. They help provide assurance to counterparties, regulators, lenders, customers and other business partners that a company’s financial statements have been reviewed by an independent professional firm. For cryptocurrency firms, that assurance became especially important after a series of failures in 2022 shook confidence across the digital asset sector.
According to Payward’s filings, Mazars was close to completing its audit when it terminated the engagement. Payward argued that the exit created the appearance of a problem even though the auditor had not made adverse findings against the company. The company said the withdrawal forced it to manage reputational concerns at a time when banks, auditors and other service providers were already reassessing their relationships with crypto firms.
Mazars cited uncertainty in the regulatory environment and pending enforcement activity as factors in its decision to withdraw, according to the arbitration documents. Payward, however, maintained that those concerns did not justify abandoning the work and that the move caused measurable harm.
The arbitration panel sided with Payward and awarded $22 million. Arbitration awards are typically private, but they can become public when a party asks a court to confirm, vacate or modify the decision. Payward’s application in Delaware brought the matter into court records.
The dispute also sheds light on the broader problems digital asset companies faced as professional service providers became more cautious. Even firms that had not been charged with misconduct found themselves navigating heightened skepticism from banks, auditors and regulators.
The backdrop of Operation Choke Point 2.0
The phrase “Operation Choke Point 2.0” was popularized by venture capitalist Nic Carter. It invokes the earlier “Operation Choke Point,” an Obama-era initiative that critics said pressured banks to cut ties with lawful but politically disfavored or higher-risk businesses, such as payday lenders and firearms dealers.
In the cryptocurrency context, the term refers to claims that federal agencies discouraged banks and other regulated firms from working with digital asset companies after the 2022 market turmoil. Supporters of the view argue that the pressure was not always expressed through direct bans, but through supervisory warnings, enforcement threats, risk guidance and informal communications.
In January 2023, the Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency issued a joint statement warning banks about risks tied to crypto assets. The agencies said they were concerned about business models heavily concentrated in crypto-related activities and cautioned banks to manage exposure carefully.
Payward’s filings cited internal communications suggesting that at least 25 letters had been sent to 24 banks urging caution or the suspension of digital asset activities. Those letters, according to the company’s argument, formed part of the environment in which traditional financial service providers became reluctant to serve cryptocurrency firms.
The federal banking agencies have generally maintained that they were focused on safety and soundness, not on cutting off lawful businesses from the financial system. Crypto companies and their supporters, however, have argued that the practical effect was to make basic banking and auditing relationships harder to maintain.
SEC actions added pressure
At the same time, the Securities and Exchange Commission under then-Chair Gary Gensler pursued enforcement actions against multiple digital asset platforms. Kraken was among the companies that faced SEC scrutiny during that period.
The SEC’s enforcement-heavy approach became one of the defining features of U.S. crypto policy after 2022. Rather than waiting for Congress to pass comprehensive market structure legislation, the agency brought cases arguing that many crypto businesses were violating existing securities laws.
Payward’s filings said Mazars considered regulatory uncertainty and pending enforcement action when it decided to end the audit engagement. That point became central to the broader narrative of the case: Payward argued that it was harmed not because of audit deficiencies, but because of a climate in which service providers feared being associated with crypto companies.
The SEC later dropped its complaint against Kraken after changes in agency leadership. Other enforcement actions linked to the same period were also dismissed or narrowed, while federal prudential regulators pulled back earlier guidance tied to “reputational risk,” a concept critics said had been used to discourage banks from serving certain lawful industries.
Those changes have strengthened complaints from crypto firms that the earlier restrictions were excessive. Still, regulators have argued that the failures of 2022 justified a tougher posture toward firms handling customer assets, trading platforms, stablecoins and related services.
Mazars had already reduced crypto work
Mazars had begun stepping back from cryptocurrency-related work before the arbitration dispute became public. In 2022, the firm stopped providing proof-of-reserves services to crypto companies, joining other professional service providers that reassessed the risks of working in the sector.
Proof-of-reserves reports had become popular after the collapse of major digital asset firms, as platforms sought to reassure customers that they held sufficient assets. But such reports were also criticized for being limited in scope because they did not always provide a full audit of liabilities, internal controls or financial condition.
Mazars’ withdrawal from proof-of-reserves work signaled that the firm saw growing risk in crypto-related engagements. Payward’s dispute, however, concerned a more traditional audit relationship. The company said the termination came too late in the process and caused harm beyond the ordinary inconvenience of changing service providers.
The case highlights a broader challenge for companies in the digital asset market. Even when they operate legally and maintain compliance programs, they often depend on outside firms such as auditors, banks, payment processors and legal advisers. If those firms withdraw because of regulatory uncertainty, the business effects can be serious.
Payward calls for clearer law
Alongside the legal action, Payward co-CEO Arjun Sethi renewed calls for Congress to pass the proposed clarity act, a bill intended to draw clearer boundaries between the SEC and the Commodity Futures Trading Commission in digital asset regulation.
The legislation seeks to define which digital assets fall under securities rules, which fall under commodities oversight and how trading platforms should register and operate. Supporters say a clear framework would reduce regulatory uncertainty and make it easier for compliant firms to operate in the United States. Critics have warned that any bill must include strong consumer protections and avoid creating loopholes for risky products.
The measure remains under committee debate in the U.S. Senate. Its slow progress has frustrated crypto companies that argue the lack of legislation leaves too much authority in the hands of regulators and courts.
The Payward-Mazars dispute gives new weight to those complaints because it shows how uncertainty can affect not only companies under direct regulatory review, but also their relationships with outside service providers.
Washington’s tone has shifted
The arbitration award comes as the policy tone in Washington has begun to shift from the enforcement-centered approach associated with the previous SEC leadership. Current SEC Chair Paul Atkins has publicly said he wants the United States to become the “crypto capital of the world” and has placed crypto-specific items on the agency’s 2026 rulemaking calendar.
Those planned rulemakings are expected to address how market participants can custody tokenized assets and how digital asset companies may raise capital under clearer standards. If completed, the rules could mark a significant change from the prior period, when many crypto firms complained that they were being asked to comply with rules that did not clearly fit their business models.
Even so, agency rulemaking is not the same as congressional legislation. Rules can be challenged in court, revised by future administrations or limited by statutory authority. A law passed by Congress would provide a more durable framework, but progress on market structure legislation remains uncertain.
Some public forecasting venues have shown declining expectations that a broad market structure bill will pass in 2026, reflecting concern that political disputes and competing legislative priorities could slow the process. That uncertainty means crypto firms may receive near-term clarity from regulators before they receive a comprehensive framework from Congress.
Market stress remains visible
The improved regulatory tone has not erased stress in digital asset markets. U.S. spot Bitcoin ETFs recorded about $4.5 billion in net outflows in June, according to market flow data cited in the original report. That marked the weakest monthly performance for the products since their launch and reduced a significant portion of the cumulative net inflows they had attracted.
The outflows showed that large traders had become more cautious after months of volatility. Spot Bitcoin ETFs are closely watched because they provide a regulated route for exposure to Bitcoin through traditional brokerage accounts. Strong inflows can support market sentiment, while sustained outflows often point to reduced demand.
Market mood also remained fragile. The Crypto Fear & Greed Index recently showed a reading of 23, placing sentiment in the “extreme fear” range. That reading followed a sharp decline in Bitcoin, which fell near $58,000 in late June before recovering above $64,000.
The rebound appeared to be driven partly by short liquidations, in which bearish traders were forced to close positions as prices rose. According to liquidation data cited in the original report, short liquidations totaled $86.60 million, compared with $54.01 million in long liquidations. Trading volume also rose sharply during the recovery, suggesting heavy participation, though not necessarily a durable return of confidence.
For traders, the key question is whether money begins returning consistently to spot Bitcoin ETFs. A few days of inflows may not be enough to change the broader picture. A sustained pattern over several weeks would provide stronger evidence that the selling pressure seen in June has slowed or reversed.
A legal win with broader consequences
Payward’s $22 million arbitration award does not resolve the larger debate over U.S. crypto regulation, but it gives the company a clear legal and financial victory in a dispute tied to one of the most difficult periods for the digital asset industry.
The case also sends a message to professional service providers. Firms may still decide that crypto-related work carries too much risk, but abrupt withdrawals from existing engagements can carry legal consequences if they violate contractual duties or cause provable harm.
For cryptocurrency companies, the award may strengthen arguments that regulatory uncertainty has real business costs. For auditors and banks, it underscores the need to document decisions carefully and distinguish between legitimate risk management and reaction to broad political or regulatory pressure.
The Delaware court has not yet completed the process of confirming the award. If it does, Payward will have an enforceable judgment and the dispute will become a notable example of how the aftershocks of the 2022 crypto crisis continue to play out in courtrooms, regulatory agencies and financial markets.
For deeper insight into how regulation shapes crypto businesses like Payward, explore the possible future of crypto regulation in the US.
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