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Australia fines Bit Trade over $5 million dollars.
Australia fines Kraken operator Bit Trade over 5M dollars
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Australia fines Kraken operator Bit Trade over 5M dollars

2024-12-12 by Ndaman Olayinka 4 minutes read
Australia fines Kraken operator Bit Trade over 5M dollars

The Australian operator of the cryptocurrency exchange Kraken, which is based in the United States, faces a multi-million dollar fine for violating regulations that demand a target market analysis for its margin extension product. Bit Trade, Kraken's Australian subsidiary, was fined AUD 8 million ($5.1 million) by the Australian Federal Court.

Bit Trade fined AUD 8 million for unlawfully issuing a credit facility

The Australian Securities and Investments Commission announced in a press release on Thursday, December 12, that Bit Trade had been fined AUD 8 million, or approximately $5.2 million, for illegally providing a credit facility to over 1,100 customers.

The company was ordered by Justice John Nicholas in the Thursday ruling to pay the fine and court costs within 60 days. According to the Federal Court, the company did not comply with Australian regulations that mandate financial products have a target market analysis to guarantee they are offered to the appropriate clients. The court determined that Bit Trade operated as a credit facility without a license and did not adhere to design and distribution requirements. 

Violation of market regulations

Nicholas called the $12.8 million sought by the Australian Securities and Investments Commission (ASIC) "excessive," but the penalty is less than that amount. Nevertheless, Bit Trade's request to limit the fine to $2.5 million was exceeded, which the judge considered "insufficient." 

Kraken stated, “We believe this case highlights the urgent need for bespoke crypto legislation to address the shortcomings that are causing confusion and uncertainty for Australian crypto investors and businesses. We believe these rulings significantly hamper growth in the Australian economy.”

Australian Securities and Investments Commission criticizes Kraken’s actions

In its September 2023 lawsuit against Bit Trade, Nicholas had sided with ASIC, which claimed that Bit Trade had provided a "margin extension" product that enabled users to trade fiat or cryptocurrency with leverage without the legally required target market determination (TMD).

ASIC Chair Joe Longo stated in a statement on December 12 that "target market determinations are fundamental in ensuring that investors are not inappropriately marketed products that could harm them."

Longo went on to say that more than 1,100 Australians used the product, lost more than $5 million, and were charged more than $7 million in fees and interest, "including one investor who lost almost US$4 million."

This is a significant outcome. It is ASIC’s first penalty against an entity for failing to have a TMD and a reminder for digital asset firms to consider their regulatory compliance obligations, Longo added.

Cryptocurrency industry under scrutiny

Nicholas stated in his order that he was "convinced that Bit Trade's violations were serious and driven by a desire to maximize profits."

He claimed that until ASIC intervened, the margin extension was granted "without any consideration" of local corporate law. 

Bit Trade was on the exchange "to make a TMD or to limit offerings of the product to non-retail clients" after learning that ASIC needed a TMD for the product, according to Nicholas. He added, "Instead, it kept offering the product to retail clients."

The regulator believes that "many products" provided by cryptocurrency companies "are captured by the current law," according to Longo's statement. "To make sure Australians receive the right protections, those products need to be properly designed and marketed to the right consumers," he continued.

Kraken expands across Europe with acquisition of Dutch broker BCM

The exchange announced on September 24 that it has completed the BCM acquisition. Kraken stated in a press release that the acquisition of BCM had improved the company's standing as a registered Virtual Asset Service Provider (VASP) in France and Poland and greatly strengthened its position in the Netherlands.

Disclaimer

This information should not be considered financial advice by any means. Please do your own research before making any investment decisions. The views in the articles are personal opinions only. Whale Insider is not responsible for any financial losses incurred.