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Kraken laying off 30% of workforce as FTX fallout continues to rock crypto industry

Crypto exchange Kraken, the second largest in the U.S., is laying off 1,100 employees, or 30 percent of its workforce, its co-founder Jesse Powell said in a statement on Wednesday.

Citing “macroeconomic and geopolitical factors have weighed on financial markets,” Powell said the company’s downsizing is a correction of growth from the prior year, when cryptocurrency prices soared and prospects for the industry appeared much brighter than today.

“We had to grow fast, more than tripling our workforce in order to provide those clients with the quality and service they expect of us. This reduction takes our team size back to where it was only 12 months ago,” said Powell.

The company's layoffs are a sweeping redirection after the company announced it was looking to fill 500 positions in a global hiring push in the middle of June. Kraken has also maintained a workplace culture self-described as "more pirate than professional," which drew scrutiny after Powell said employees unhappy with the company's culture tenants could leave.

In September, Powell announced he was stepping down as CEO and would be succeeded by COO Dave Ripley. However, Powell signed Wednesday's memo as founder and CEO.

Kraken's downsizing comes in the wake of FTX's collapse earlier this month, with downsizing and bankruptcies in the space punctuating one of the roughest years on record for the industry.

Following FTX's Chapter 11 bankruptcy filing on November 11, at least a million investors seen funds locked on the platform, including dozens of financial firms and industry players. The offshore exchange is estimated to its creditors $8 billion.

NEW YORK, NEW YORK - JUNE 23: Sam Bankman-Fried speaks onstage during the first annual Moonlight Gala benefitting CARE - Children With Special Needs - hosted by Michael Cayre, Roy Nachum and MegaMoon Museum at Casa Cipriani on June 23, 2022 in New York City. (Photo by Craig Barritt/Getty Images for CARE For Special Children )
Sam Bankman-Fried speaks onstage during the first annual Moonlight Gala benefitting CARE - Children With Special Needs - hosted by Michael Cayre, Roy Nachum and MegaMoon Museum at Casa Cipriani on June 23, 2022 in New York City. (Photo by Craig Barritt/Getty Images for CARE For Special Children)

Crypto lending platform, BlockFi, which filed for bankruptcy Monday, disclosed in recent court documents it held $355 million in assets with FTX.

Genesis Trading, which had $175 million with FTX, paused customer withdrawals, telling clients it had faced liquidity pressures following FTX’s demise.

Away from the direct impact of FTX's fallout, layoffs had been a regular feature in the fintech and crypto space over the last several months.

At the beginning of November, payments company Stripe cut around 14% of its workforce or 1,000 positions according to a memo from CEO Patrick Collision. In October, Crypto.com laid of 2,000 workers. Galaxy Digital also cut one fifth of its workforce.

Currently listed as the 10th largest centralized crypto exchange by trading volume according to crypto Indexer Nomics, Kraken's trading activity has plunged 54%, to $236 billion, since the beginning of January, while volume for all exchanges has dropped 16% to $83 trillion.

On Monday, the U.S. Treasury Department announced it had reached a $362,000 settlement agreement with Kraken after discovering the exchange had offered services to users in Iran.

David Hollerith is a senior reporter at Yahoo Finance covering the cryptocurrency and stock markets. Follow him on Twitter at @DsHollers

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