Australian Securities & Investments Commission Fines Crypto Exchange Kraken Operated by Bit Trade $5 Million for Illegally Providing Credit Facility via Margin Extension to More than 1,100 Australia Customers to be Made & Prepaid in Digital Assets or National Currencies Including USD, Charged Fees & Interest of More than $7 Million with Customers Suffering from $5 Million Trading Losses with 1 Investor Losing $4 Million
16th December 2024 | Hong Kong
The Australian Securities & Investments Commission (AISC) has fined crypto exchange Kraken operated by Bit Trade $5 million (AUD 8 million) for illegally providing credit facility via margin extension to more than 1,100 Australia customers to be made & prepaid in digital assets or national currencies including USD. Kraken (Bit Trade) charged fees & interest of more than $7 million, with customers suffering from $5 million trading losses and with 1 investor losing almost $4 million. ASIC (12/12/24): “Legal proceedings launched by ASIC have seen the Australian operator of the Kraken crypto exchange ordered to pay $8 million for unlawfully issuing a credit facility to more than 1100 Australian customers. From October 2021, Bit Trade Pty Ltd, which operated the Kraken exchange, had offered its customers a ‘margin extension’ product without a target market determination (TMD). The product provided for margin extensions to be made and repaid in either digital assets like bitcoin or national currencies such as US dollars. In August this year, the Federal Court found that Bit Trade’s product was a credit facility and required a TMD as the product offered margin extensions in national currencies. As a result, the company breached its design and distribution obligations (DDO) each time it offered the margin extension product to a customer without the required TMD. In handing down his penalty decision today, Justice Nicholas noted that Bit Trade ‘did not turn its mind to the requirement of the DDO regime until these were first drawn to its attention by ASIC’ and that ‘the failure to consider that matter points to a seriously deficient compliance system.’ His Honour observed that the product was made available to customers without any consideration of the impact of the DDO regime until after ASIC intervention and that Bit Trade continued to offer the product when it knew or ought to have known it was likely in breach of the law. ‘I am satisfied that Bit Trade’s contraventions were serious and motivated by a desire to maximise revenue,’ His Honour said. The penalty comes shortly after ASIC commenced industry consultation with the digital-assets sector. ASIC is seeking feedback from digital assets providers and exchanges on draft updates to our guidance on when products offered by digital asset firms may be considered regulated products under the current law. Bit Trade was also ordered to pay ASIC’s costs for the proceedings.”
“ Australian Securities & Investments Commission Fines Crypto Exchange Kraken Operated by Bit Trade $5 Million for Illegally Providing Credit Facility via Margin Extension to More than 1,100 Australia Customers to be Made & Prepaid in Digital Assets or National Currencies Including USD, Charged Fees & Interest of More than $7 Million with Customers Suffering from $5 Million Trading Losses with 1 Investor Losing $4 Million “
ASIC Chair Joe Longo: “Target market determinations are fundamental in ensuring that investors are not inappropriately marketed products that could harm them. Bit Trade issued its margin extension product to over 1100 Australians who were charged fees and interest of more than US$7 million without considering if the product was appropriate for them. Those customers Bit Trade targeted suffered trading losses of more than US$5 million, including one investor who lost almost US$4 million. This is a significant outcome. It is ASIC’s first penalty against an entity for failing to have a TMD and a reminder for digital assets firms to consider their regulatory compliance obligations. ASIC believes many products offered by digital assets firms are captured by the current law, which means those products need to be properly designed and marketed to the right consumers to ensure Australians receive appropriate protections.”
Australian Securities & Investments Commission Fines Crypto Exchange Kraken Operated by Bit Trade $5 Million for Illegally Providing Credit Facility via Margin Extension to More than 1,100 Australia Customers to be Made & Prepaid in Digital Assets or National Currencies Including USD, Charged Fees & Interest of More than $7 Million with Customers Suffering from $5 Million Trading Losses with 1 Investor Losing $4 Million
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