Australian regulator sues Kraken provider Bit Trade for $13M in user losses

The Australian Securities and Investments Commission (ASIC) alleged that Kraken Crypto Exchange’s provider, Bit Trade Pty Ltd, caused Australians losses of roughly $12.95 million due to non-compliance with local laws.

Due to this, the financial regulator has filed a lawsuit against Bit Trade, highlighting how its margin trading product failed to comply with the design and distribution obligations tied to it. According to the regulator, Bit Trade did not correctly identify a target market before launching the product.

“ASIC’s case focuses on Bit Trade’s failure to make a target market determination for the product before offering it to Australian customers, as required by law.”

While ASIC describes Bit Trade’s margin trading product as a credit facility, Bit Trade calls it a “margin extension,” allowing users to receive up to five times their assets.

Bit Trade has been offering the margin trading product since 2020, and ASIC said it informed the company about its concerns in 2022. However, the exchange continued offering the product without determining the necessary market.

The regulator is seeking penalties, injunctions, and injunctions against the exchange.

ASIC Deputy Chair Sarah Court said the proceedings would warn other crypto companies to ensure compliance with the country’s financial regulations. Court added:

“ASIC’s action should be a reminder of the importance to comply with the design and distribution obligations so that financial products are distributed to consumers appropriately.”

Kraken expresses shock and disappointment

Jonathon Miller, the Director of Kraken Australia, expressed disappointment at the enforcement action against the company. He pledged to seek further clarification from regulators and emphasized that their product fully complies with local laws.

This move by ASIC to crack down on Bit Trade aligns with a broader trend of regulatory oversight within the cryptocurrency industry. In July, ASIC revoked the license of FTX Australia as part of its efforts to establish comprehensive regulatory frameworks.

Furthermore, traditional financial institutions like Westpac and National Australia Bank (NAB) have been taking measures to limit payments to cryptocurrency exchanges. This aligns with their strategy to mitigate customer exposure to potential scams and risks associated with the crypto market.

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