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Bit Trade, Kraken’s Australian Entity, Fined $5.2 Million for Non-Compliance
Bit Trade, the Australian operator of the Kraken crypto exchange, has been fined AUD 8 million (approximately $5.2 million) for failing to comply with Australian regulations. The fine was imposed due to the company’s failure to obtain a target market determination for its margin extension product.
The Australian Securities and Investments Commission (ASIC) announced the fine in a press release, stating that Bit Trade had unlawfully issued a credit facility to over 1,100 customers. The company’s margin extension product, which was offered from October 2021, allowed customers to make and repay margin extensions in digital assets, such as Bitcoin, or national currencies, including the US dollar.
Regulatory Breach
The Federal Court found that Bit Trade’s product breached design and distribution obligations requirements every time it was issued without a target market determination. This regulatory document is crucial in ensuring that financial products are offered only to suitable customers.
As a result of the breach, customers were charged fees and interest exceeding $7 million, with trading losses surpassing $5 million. One investor reportedly lost nearly $4 million using the margin extension product.
ASIC’s Response
Justice Nicholas described Bit Trade’s actions as “serious and motivated by a desire to maximize revenue.” ASIC Chair Joe Longo commented on the ruling, stating that it is a “significant outcome” and a reminder for digital assets firms to consider their regulatory compliance obligations.
In addition to the fine, Bit Trade was ordered to cover ASIC’s legal costs. This ruling serves as a warning to other digital assets firms to ensure they comply with regulatory requirements.
“It is ASIC’s first penalty against an entity for failing to have a TMD and a reminder for digital assets firms to consider their regulatory compliance obligations.” – ASIC Chair Joe Longo
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