Kraken’s Australian Subsidiary Sued By Regulators

The Australian Securities and Investments Commission (ASIC) has sued Bit Trade, the Australian provider of the Kraken crypto exchange. The regulatory body alleges that Bit Trade failed to adhere to design and distribution obligations related to one of its trading products. 

Margin Trading Product in Question

The focal point of this dispute revolves around Bit Trade’s margin trading product. Significantly, the financial regulator purports that Bit Trade introduced this product to Australian customers without making a prior target market determination. Since enforcing the design and distribution obligations in October 2021, over 1,160 Australian users have reportedly used Bit Trade’s margin trading service. Consequently, these users experienced a cumulative loss of around $8.35 million or 12.95 million Australian dollars.

Moreover, despite being notified by ASIC in June 2022 regarding its shortcomings, Bit Trade allegedly offered its product without the requisite determinations. The margin trading product in question allows clients to get a credit extension of up to five times their collateral value. However, ASIC contends that this offering is a “credit facility”. It offers users “credit for transacting in specific crypto assets on the Kraken platform”.

Reactions from Kraken’s Australian Branch

Jonathon Miller, who oversees Kraken’s operations in Australia, expressed his astonishment at ASIC’s move. He was under the impression that the product complied with local mandates. Miller mentioned, “We have been actively engaging with ASIC to ensure our product offering aligns with compliance standards.” He added, “We were both taken aback and disheartened by today’s enforcement action. We firmly believe that our product aligns with Australian regulations and will persist in seeking clarity on this matter.”

Sarah Court, ASIC’s deputy chair, emphasized that this action is an essential reminder for the crypto sector. She stated that financial offerings will persistently undergo rigorous evaluation by regulatory bodies. This is to guarantee their compliance with Australia’s stringent consumer protection laws. Hence, she remarked, “ASIC’s move underscores the significance of adhering to design and distribution mandates. This ensures that financial products fittingly reach consumers.”

Previously, ASIC has shown a strict position on cryptocurrency in the country. In August, the regulator launched a lawsuit alleging that eToro Aus Capital Ltd. breached its contract’s design and distribution obligations for difference (CFD) products.

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Sunil is a serial entrepreneur and has been working in blockchain and cryptocurrency space for 2 years now. Previously he co-founded Govt. of India supported startup InThinks and is currently Chief Editor at Coingape and CEO at SquadX, a fintech startup. He has published more than 100 articles on cryptocurrency and blockchain and has assisted a number of ICO’s in their success. He has co-designed blockchain development industrial training and has hosted many interviews in past. Follow him on Twitter at @sharmasunil8114 and reach out to him at sunil (at) coingape.com

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