Australian Regulator Gets legal Victory Against Kraken Operator Bit Trade

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Sujha Sundararajan

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Sujha Sundararajan

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Bit Trade

The Australian Securities and Investments Commission (ASIC) has won the court case against Kraken’s operator Bit Trade, for its failure to comply with design and distribution obligations.

On Friday, a Federal Court ruled against Bit Trade as it didn’t have a clear design while offering margin trading. Bit Trade, which operates Kraken in Australia, had been offering “margin extension” product without a target market determination.

The platform has breached the country’s Corporations Act section s994B(2) since October 2021, the ruling noted.

The securities regulator noted this and initiated proceedings against the major global crypto firm. The move sends a message to the Australian crypto industry that ASIC would continue to crackdown non-compliant crypto players. ASIC Deputy Chair Sarah Court noted that this would “ensure they comply with regulatory obligations in order to protect consumers.”

“It is a legal requirement for financial products to be distributed to consumers appropriately. Consumers should receive the full protection of the law when dealing in crypto-asset products.”

Bit Trade’s Non-Compliance in Design and Distribution

Bit Trade, an AUSTRAC-registered firm, provided product for margin extensions to be made in both crypto and fiat currencies.

Further, the design and distribution obligations, require companies to design financial products that meet the needs of Australians. Also, the target market determination is an important factor in the obligation.

However, the ASIC argued that Bit Trade’s margin trading product was launched without a target market determination, specifying appropriate customers.

As a result, the regulator filed a civil suit against the firm in September 2023.

Additionally, the ASIC also stressed that since Bit Trade’s product allowed Australians to receive an extension of 5x credit of the asset’s value, it violated regulations by operating as a credit facility.

In 2020, Kraken crypto exchange acquired Bit Trade to offer crypto offer digital asset services in Australia.

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