Australian Kraken Operator Faces $5.2 Million Fine

Bit Trade, the Australian operator of Kraken, is fined AUD 8 million for unlawfully issuing credit facilities without proper market determination.

Bit Trade, the Australian operator of the Kraken crypto exchange, has been fined AUD 8 million (around $5.2 million) for unlawfully issuing a credit facility to over 1,100 customers. This penalty was in line with an Australian Securities and Investments Commission (ASIC) case. Consequently, the regulatory failure has made Bit Trade to be held responsible for breaching its obligations.

The margin extension was introduced to the Bit Trade platform in October 2021. With this product, customers could provide credit in digital assets such as bitcoin and national currencies, including the US dollar. However, the above product never had target market determination (TMD), which is a legal requirement for any credit facility.

In August, the Federal Court ruled that the margin extension product was considered a credit facility and required a TMD. Every time the product was launched without this determination, Bit Trade acted contrary to its legal responsibilities.

ASIC Slams Bit Trade with Major Fine Over Consumer Protection Failure

According to ASIC Chair Joe Longo, TMDs are important in protecting consumers from inadequate products. He emphasized that Bit Trade’s product was marketed to over 1,100 Australians. These customers spent more than 7 million US dollars in fees and interest. Some of the customers raised their losses to a high level; one of the investors lost about 3.9 million US dollars. Longo said the fine was a major move against Bit Trade and a shot across the bows of digital asset firms about the rules.

Justice Nicholas in his judgment noted that Bit Trade neglected its compliance responsibilities until the involvement of ASIC. He accused the company of making the product available because they knew they were probably violating the law. In his ruling, the judge pointed out that it seemed that Bit Trade acted out of the intention to make as much money as possible. This proved the negligence of the company’s compliance systems.

This penalty comes as ASIC has been holding consultations with digital asset-sector participants. The commission has been developing new guidelines concerning when specific digital asset products are regulated. This case serves as a reminder for the industry to adhere to legal standards and prioritize consumer protection.

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