The Australian Securities and Investments Commission (ASIC) has taken legal action against Bit Trade Pty Ltd, the operator of Kraken Crypto Exchange, citing alleged violations of local financial regulations that may have caused losses exceeding $12.95 million for Australian investors. The ASIC lawsuit centers on Bit Trade’s purported failure to comply with design and distribution obligations related to its margin trading product.
ASIC asserts that Bit Trade did not conduct a proper assessment of its target market prior to launching the product, a violation of Australian financial laws. Bit Trade’s margin trading offering, known as a “margin extension,” enables users to access leverage up to five times their assets. This product has been available since 2020, and ASIC initially raised concerns with the company in 2022. Despite these concerns, Bit Trade continued offering the product without conducting the necessary market assessment.
Deputy Chair Sarah Court emphasized the significance of regulatory compliance, stating, “ASIC’s action should be a reminder of the importance of complying with the design and distribution obligations so that financial products are distributed to consumers appropriately.” ASIC is seeking penalties and injunctions against Bit Trade.
In response, Jonathon Miller, Director of Kraken Australia, expressed disappointment and vowed to seek further clarity from regulators, insisting that their product fully adheres to local laws.
This enforcement action underscores the growing trend of regulatory scrutiny in the cryptocurrency sector. In July, ASIC revoked FTX Australia’s license as part of its broader efforts to establish comprehensive regulatory frameworks. Traditional financial institutions like Westpac and National Australia Bank (NAB) have also restricted payments to cryptocurrency exchanges to protect customers from potential scams and market risks.
ASIC’s actions send a clear message to crypto companies operating in Australia: strict adherence to financial regulations is imperative to safeguard consumers and maintain market integrity. This development follows ASIC’s legal action against BPS Financial Pty Ltd in October 2022, which served as a warning to other Australian crypto issuers regarding deceptive practices related to the cryptocurrency token, Qoin.
