Kraken’s Bit Trade Fined $5.1M AUD for Regulatory Violations

Bit Trade, the Australian subsidiary of Kraken, has been fined $5.1 million AUD (approx. $3.2 million USD) by the Australian Federal Court for offering a margin lending product to customers without regulatory approval.

According to a media release from the Australian Securities and Investments Commission (ASIC), Bit Trade Pty Ltd has been offering a “margin extension” product to its Australian customers since October 2021.

However, the product was provided without the necessary target market determination (TMD), which is required by Australian financial regulations. The margin extension product offered by Bit Trade allowed customers to borrow funds and repay them using either digital assets like Bitcoin or traditional currencies, including U.S. dollars.

In August, the Australian Federal Court ruled that Bit Trade violated its design and distribution obligations (DDO) each time it offered the margin extension product without a proper TMD.

Per the report, Bit Trade offered its product to over 1,100 Australians, who were subsequently charged more than $7 million USD in fees and interest. The report also revealed that these targeted customers faced significant trading losses totaling over $5 million USD. One investor alone suffered nearly $4 million USD in losses.

“Target market determinations are fundamental in ensuring that investors are not inappropriately marketed products that could harm them,” ASIC Chair Joe Longo stated regarding the issue.

Longo revealed that the fine imposed on Bit Trade marks the first penalty against a cryptocurrency exchange for failing to implement a TMD. He emphasized that this penalty serves as a warning to other platforms that have yet to fully comply with regulatory requirements.

In August 23, Justice John Nicholas ruled that Bit Trade violated the Corporations Act when it failed to create a TMD for its product. The court found that the company contravened section 994B(1) of the Act, in conjunction with section 994B(2).

In addition to the $5.1 million fine, the court also ordered Bit Trade to cover ASIC’s costs related to the legal proceedings.

Michaela has no crypto positions and does not hold any crypto assets. This article is provided for informational purposes only and should not be construed as financial advice. The Shib Magazine and The Shib Daily are the official media and publications of the Shiba Inu cryptocurrency project. Readers are encouraged to conduct their own research and consult with a qualified financial adviser before making any investment decisions.

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