Jessie Powell got right to the point.
The co-founder and CEO of Kraken tweeted his feelings on Nov. 30 after the cryptocurrency exchange announced that it was laying off about 1,100 employees, or 30% of its workforce, "in order to adapt to market conditions."
"Rough day at @krakenfx," Powell said. "Headcount rolled back 12 mos. Macro was already tough and we held out but recent industry woes diminished near-term optimism about a crypto rebound. Better positioned now. Glad we were able to take good care of our former colleagues. Been a privilege."
In a company blog post entitled "Kraken Takes Steps to Weather Crypto Winter," Powell said that since the start of this year, "macroeconomic and geopolitical factors have weighed on financial markets."
"This resulted in significantly lower trading volumes and fewer client sign-ups," Powell wrote. "We responded by slowing hiring efforts and avoiding large marketing commitments. Unfortunately, negative influences on the financial markets have continued and we have exhausted preferable options for bringing costs in line with demand."
Powell said that "all departing Krakenites" would receive comprehensive support, including 16 weeks of base pay, four months of healthcare continuation coverage for eligible employees, and outplacement support.
"I’m confident the steps we are taking today will ensure we can continue to deliver on our mission which the world needs now more than ever before," he wrote.. "I remain extremely bullish on crypto and Kraken."
It was a different story back in June, when Powell said that "we have over 500 roles to fill to during the remainder of the year, and believe bear markets are fantastic at weeding out the applicants chasing hype from the true believers in our mission."
'A Major Transition'
"We recognize that hurt feelings are inevitable in a global organization that is optimizing for team outcomes above individual sentiment," he wrote on June 15. "The ideal Krakenite is thick-skinned and well intentioned."
Frank Corva, senior analyst for digital assets at Finder, said Kraken "is undergoing a major transition right now," especially since Powell, announced in September that he would step down from his chief executive role.
"It’s been rumored that the company – which is valued at approximately $10 billion – plans to go public under the guidance of its new CEO Dave Ripley, who was the former COO of the company," Corva said.
"Ripley might be making cuts to staff in preparation for the company to go public, as, especially after a challenging year in the crypto industry, the exchange will need to show that its cash flow is positive as it approaches its potential valuation by the public market," he added..
The layoff announcement comes just days after the U.S. Treasury Department said Kraken had settled with the government and agreed to pay more than $360,000 for apparently violating America's sanctions laws related to Iran
The company failed to prevent more than 820 individuals in Iran from conducting more than $1.6 million worth of crypto transactions on its platform between October 2015 to June 2019, according to the Office of Foreign Assets Control (OFAC).
OFAC, however, assessed that Kraken's conduct was "non-egregious and voluntarily self-disclosed," significantly reducing the settlement it paid.
'Driven by His Beliefs'
The company has also signed on to spend $100,000 on improving its sanctions compliance system, which includes instituting an automated internet protocol address blocking system that would prevent users in Iran from accessing Kraken for crypto transactions in the future.
"Under Ripley, you’ll likely see less issues like the exchange violating certain sanctions, as he seems to be a bit less of a crypto purist than Powell," Corva said. "Powell – a self-avowed libertarian – was often driven by his beliefs that the state should have a minimal role in people’s financial affairs and less by his desire to adhere to state-sponsored sanctions."
David Lesperance, managing partner of immigration and tax adviser Lesperance & Associates, said "the employees of Kraken suffered the consequences not just of the crypto winter…but also their founders' misconception that international sanctions rules didn’t apply in the crypto sphere."
"With $360,000 taken out of the company to pay OFAC’s fine for Iran sanctions violations, deeper cuts had to take place," he said. "That is a precedent which other exchanges who may have engaged in similar past behavior will need to include in their future budget predictions."
The news stirred up powerful responses on social media.
"So basically there is nowhere to safely buy crypto," one person tweeted. "Yeah, that's a healthy market ready for mass adoption. People will be paranoid to just transfer cash to purchase for fear of getting locked out. I know I am."
'A Great Business Decision'
"No this is a great business decision," another person said. "Layoffs happen every best market cycle. Should have happened sooner imo."
"They make money off of fees from trades," another tweet read. "if trading/exchanging is down they probably need to cut for budget reasons."
The layoffs are just the latest bit of bad news to wallop the crypto sector. Investors are still contending with the collapse of FTX cryptocurrency exchange earlier this month.
Earlier this month, Powell noted that there were "red flags" in the company's books and blasted FTX founder and CEO Sam Bankman-Fried for his "ego purchase" of the naming rights to American Airlines Arena in Miami, frequent trips to Washington, D.C., to "buy political favor" and generally "being overeager to please D.C.," along with being a " 'media darling' seeking out puff pieces."
"I pray for everyone who got caught up in this mess," Powell said in a Nov. 10 tweet.. "I hope it doesn't turn you off of crypto. I hope you take care of yourself and continue to be a part of this community. These are growing pains. Money can be made again. Stay with me."
"I remain your humble servant, Jesse"