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Bit Trade Pty Ltd, the provider of the Kraken crypto exchange in Australia, is facing civil proceedings initiated by the Australian Securities and Investments Commission (ASIC) for alleged non-compliance with design and distribution obligations (DDO) concerning its margin trading product.
ASIC alleges that Bit Trade failed to make a target market determination before offering its margin trading product to Australian customers. DDO is a legal requirement for financial product providers in Australia, mandating that products meet customer needs and are distributed in a targeted manner.
Bit Trade offers credit for buying and selling certain crypto assets on the Kraken exchange, allowing customers to extend credit up to five times the value of their collateral. ASIC claims that since DDO came into effect in October 2021, at least 1,160 customers incurred total losses of approximately A$12.95 million (£6.74 million) while using Bit Trade’s margin trading product.
Despite receiving notice of ASIC’s concerns in June 2022, Bit Trade allegedly continued offering the product without fulfilling the necessary regulatory determinations. ASIC seeks declarations, pecuniary penalties, and injunctions to prevent Bit Trade from ongoing non-compliance.
Sarah Court, ASIC’s deputy chair, emphasized the importance of these proceedings, stating they send a message to the crypto industry about the continued scrutiny of products by ASIC to ensure compliance with regulatory obligations and consumer protection.
Bit Trade expressed surprise and disappointment regarding the proceedings. Jonathon Miller, managing director of Kraken’s Australian operations, noted their efforts to engage constructively with ASIC on compliance matters. He stated that they were surprised and disappointed by the enforcement action taken by ASIC.
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