Australia fines Kraken’s operator $5m for unlawful credit facility

Kraken’s Australian entity, Bit Trade, is facing a multi-million fine for failing to comply with rules requiring a target market determination for its margin extension product. The Australian operator of the Kraken crypto exchange, Bit Trade, has been fined AUD 8 million (around $5.2 million) for unlawfully issuing a credit facility to more than 1,100 customers, the Australian Securities and Investments Commission said in a Thursday press release , Dec. 12. The Federal Court ruled that the company failed to follow Australian laws requiring financial products to have a target market determination to ensure they are sold to the right customers. From October 2021, Bit Trade offered a margin extension product that “provided for margin extensions to be made and repaid in either digital assets like Bitcoin ( BTC ) or national currencies such as U.S. dollars,” the regulator says. However, the product was marketed without a required target market determination, a key regulatory document meant to ensure financial products are offered only to suitable customers. You might also like: Kraken unveils broker offering in Australia for institutions The court found Bit Trade’s product breached design and distribution obligations requirements every time it was issued without a target market determination. Customers were charged fees and interest exceeding $7 million, with trading losses surpassing $5 million, the regulator claims. One investor reportedly lost nearly $4 million using the margin extension product. Justice Nicholas, in his ruling, described Bit Trade’s actions as “serious and motivated by a desire to maximize revenue,” adding that the company failed to address compliance requirements until flagged by ASIC. Commenting on the ruling, ASIC Chair Joe Longo called it a “significant outcome,” adding that “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.” In addition to the fine, Bit Trade was ordered to cover ASIC’s legal costs. Read more: Crypto investors still driven by FOMO and FUD, Kraken warns

Source: crypto.news