- Kraken Operator fined AUD 8M for regulatory non-compliance in Australia.
- ASIC highlights need for crypto firms’ compliance with financial laws
The Australian Federal Court has imposed an AUD 8 million ($5.1 million) fine on Bit Trade, the Australian operator of cryptocurrency exchange Kraken, for violating financial regulations. Justice John Nicholas ruled on Dec. 12 that Bit Trade breached design and distribution obligations and unlawfully operated as a credit facility without the necessary license.
The penalty, which Bit Trade must pay within 60 days, is less than the AUD 12.8 million sought by the Australian Securities and Investments Commission (ASIC). However, it exceeds the AUD 2.5 million proposed by the company, which the court deemed “insufficient.”
ASIC’s lawsuit, filed in September 2023, targeted Bit Trade’s margin extension product. The product allowed users to trade digital assets or fiat currencies with leverage, but the company failed to implement a legally required target market determination (TMD). This document ensures financial products are marketed to suitable customers.
Over 1,100 Australians used the margin extension product, accruing more than AUD 7 million in fees and interest. Customers suffered trading losses exceeding AUD 5 million, including one who lost nearly USD 4 million.
Moreover, ASIC Chair Joe Longo highlighted the significance of the ruling, describing it as the first penalty issued under Australia’s TMD requirements. “This decision underscores the importance of regulatory compliance to protect investors from unsuitable financial products,” he said.
Kraken’s Response
A Kraken spokesperson acknowledged the court’s recognition of their compliance efforts but expressed disappointment in the outcome. They emphasized the urgent need for tailored cryptocurrency regulations to reduce uncertainty for Australian businesses and investors.
Justice Nicholas criticized Bit Trade for prioritizing revenue over compliance. He noted that despite ASIC’s intervention, the company continued offering the product to retail clients without addressing legal requirements.
The case sets a precedent for Australia’s crypto industry, with regulators urging firms to align with existing laws to ensure consumer protection.
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