The Australian Securities and Investments Commission (ASIC) has alleged that Bit Trade Pty Ltd, the provider of Kraken Crypto Exchange, caused Australian investors losses totaling approximately $12.95 million due to non-compliance with local laws. ASIC has now filed a lawsuit against Bit Trade, highlighting its failure to comply with design and distribution obligations for its margin trading product.
The regulatory body claims that Bit Trade did not properly identify a target market before launching the product, a violation of Australian law. Bit Trade’s margin trading product, which it refers to as a “margin extension,” allows users to access up to five times their assets. This product has been available since 2020, and ASIC informed the company of its concerns in 2022. However, Bit Trade continued offering the product without making the required market determination.
ASIC is seeking penalties and injunctions against Bit Trade, with Deputy Chair Sarah Court emphasizing the importance of compliance with financial regulations. She stated,
“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.”
In response to the enforcement action, Jonathon Miller, Director of Kraken Australia, expressed disappointment and pledged to seek further clarification from regulators, asserting that their product fully complies with local laws.
This move by ASIC to crack down on Bit Trade reflects the broader trend of regulatory oversight in the cryptocurrency industry. In July, ASIC revoked the license of FTX Australia as part of its efforts to establish comprehensive regulatory frameworks. Additionally, traditional financial institutions like Westpac and National Australia Bank (NAB) have been limiting payments to cryptocurrency exchanges as a strategy to mitigate customer exposure to potential scams and risks associated with the crypto market.
This regulatory action serves as a clear signal to crypto companies operating in Australia to ensure strict compliance with financial regulations to protect consumers and maintain market integrity.
Earlier in a report by Todayq News on October 25, 2022, ASIC took legal action against BPS Financial Pty Ltd for deceptive practices related to its cryptocurrency token, Qoin. This action served as a warning to other Australian crypto issuers. BPS was accused of unlicensed conduct regarding Qoin, which allowed businesses to accept it as payment. ASIC emphasized the need for accurate information in the volatile and complex crypto market, acknowledging the uniqueness of each cryptocurrency and the difficulty of comparisons.