The Australian Securities and Investments Commission (ASIC) has fined Bit Trade – the operator behind the Kraken exchange – $5 million for unlawfully providing a credit facility, according to a December 12 statement.
The fine follows a federal court ruling that found the company violated legal obligations.
According to the statement, Bit Trade offered a ‘margin expansion’ product to more than 1,100 Australian customers as of October 2021. This product gave users access to extended trading limits, with redemptions allowed in digital assets such as Bitcoin or traditional fiat currencies.
However, the court found that the offer constituted a credit facility, which required a target market determination (TMD) under the Australian Design and Distribution Obligations (DDO). Bit Trade failed to meet this requirement, leading to significant compliance violations.
The court revealed that Bit Trade collected more than $7 million in fees and interest from its customers. Despite these earnings, trading losses exceeded $5 million, with one investor reportedly losing more than $4 million.
Judge Nicholas, who presided over the case, said the company prioritized revenue over regulatory compliance. He noted that compliance measures were only addressed following ASIC’s intervention.
As a result, Judge Nicholas ordered Bit Trade to pay a fine of AUD 8 million (approximately $5 million) and cover ASIC’s legal costs.
ASIC chairman Joe Longo emphasized that defining the target market is essential to protect consumers and ensure financial products are marketed responsibly. He emphasized that this fine, the first related to TMD breaches, warns other companies of the consequences of neglecting compliance.
He stated:
“ASIC believes that many products offered by digital asset companies are covered by the current law, which means these products must be appropriately designed and marketed to the right consumers to ensure Australians receive appropriate receive protection.”