Key Points
- Kraken’s Australian operator, Bit Trade, was fined $5.1 million for regulatory violations.
- The case involves the unlawful issuance of a margin trading product to over 1,100 customers.
- This marks the first penalty for failing to provide a target market determination.
- Kraken expressed disappointment but pledged to engage with regulators on future policies.
Australia’s corporate watchdog, the Australian Securities and Investments Commission (ASIC), announced on Thursday that the Federal Court had ordered Bit Trade, the local operator of the crypto exchange Kraken, to pay an A$8 million ($5.1 million) fine. The penalty stems from Bit Trade’s unlawful issuance of a credit facility to over 1,100 customers without complying with regulatory requirements.
ASIC initiated civil proceedings against Bit Trade last year, alleging violations in the operation of its margin trading product. The court found that the company failed to assess whether the product was appropriate for its users, resulting in collective customer losses exceeding $5 million.
According to ASIC, Bit Trade’s actions affected more than 1,100 Australians, who collectively paid fees and interest exceeding $7 million. The regulator emphasized that the company did not conduct necessary evaluations to ensure the product suited its customers’ needs. This oversight marked a significant breach of Australia’s financial regulations.
The Federal Court ruled that the margin trading product qualified as a credit facility under Australian law. This law mandates the preparation of a public document known as a target market determination, which outlines the consumer class most suited to a financial product. Bit Trade’s failure to comply with this requirement resulted in the landmark penalty, the first of its kind for such an infraction.
In response to the ruling, a Kraken spokesperson expressed disappointment, stating that the decision would hinder growth within the Australian economy. The company added that it aims to work collaboratively with policymakers and regulators to develop clear rules for the industry.
