The Australian Securities and Investments Commission (ASIC) has fined Bit Trade, the local operator of the Kraken crypto exchange, of AUD 8 million (approximately USD 5.2 million) for illegally providing credit facilities to over 1,100 customers.
The announcement was made on December 12.
According to the regulators, In October 2021, Bit Trade introduced a margin extension product that permitted repayments in digital assets like Bitcoin or traditional currencies such as U.S. dollars. However, this product was promoted without the required target market determination, a crucial regulatory measure to ensure financial products are offered to suitable customers. As a result, customers incurred fees and interest exceeding $7 million and trading losses over $5 million.
They also pointed out that one investor allegedly lost close to $4 million using the margin extension product. Justice Nicholas criticized Bit Trade’s actions as “serious and driven by a desire to maximize revenue,” noting the company neglected compliance obligations until ASIC intervened.
The Federal Court ruled that Bit Trade breached Australian regulations by not creating a target market determination. This determination is required to ensure financial products are marketed appropriately to suitable customers. The court found that Bit Trade’s product violated design and distribution obligations each time it was issued without a target market determination.
ASIC Chair Joe Longo hailed the ruling as a “significant outcome,” emphasizing it as the first penalty for failing to have a Target Market Determination (TMD). He urged digital asset firms to prioritize regulatory compliance. Alongside the hefty fine, Bit Trade was also ordered to pay ASIC’s legal expenses.
This court case comes amidst ASIC increasing its oversight of the cryptocurrency market with the release of Consultation Paper 381 on December 4. The paper proposes applying existing financial product definitions to cryptocurrencies, addressing licensing issues for stablecoins and wrapped tokens, and providing transitional measures for businesses.
If you want to read more news articles like this, visit DeFi Planet and follow us on Twitter, LinkedIn, Facebook, Instagram, and CoinMarketCap Community.
“Take control of your crypto portfolio with MARKETS PRO, DeFi Planet’s suite of analytics tools.”
