The Australian Securities and Investment Commission (ASIC) sued Bit Trade Pty Ltd, the provider of Kraken to the Australian market. The regulator alleged the company failed to comply with design and distribution obligations for its margin trading product.
According to reports by Reuters, Australia’s corporate regulator, the Australian Securities and Investment Commission (ASIC), instituted civil proceedings against Bit Trade, the provider of the cryptocurrency exchange Kraken to Aussie customers.
Bit Trade Failed to Comply with DDOs
In a statement, the “ASIC alleges that Bit Trade failed to comply with the design and distribution obligations for the margin trading product it offers Australian customers on the Kraken exchange.”
Reuters explained Design and distribution obligations (DDO) require firms to design their financial products to meet the needs of consumers and distribute these products in a targeted manner.
We are suing Bit Trade, provider of the Kraken crypto exchange in Australia, for allegedly failing to comply with the design and distribution obligations (DDO) for its margin trading product. Since October 2021, customers have lost about $12.95 million https://t.co/MCRYqah0dP pic.twitter.com/zURQ2xDw7M
— ASIC Media (@asicmedia) September 20, 2023
The ASIC said its case focuses on the company’s “failure to make a target market determination for the product before offering it to Australian customers.” According to the ASIC, Bit Trade’s margin trading product is a “credit facility as it offers customers credit for the use in the sale and purchase of certain crypto assets on the Kraken exchange.” Bit Trade argues this “credit facility” is a “margin extension.”
Customers Can Receive x5 Credit Extension
The ASIC noted Bit Trade’s customers could receive a credit extension of up to five times the value of the assets they put up as collateral. The regulator further said at least 1,160 customers had used Bit Trade’s margin trading product and incurred a total loss of $8.35 million since DDO started in October 2021.
Sarah Court, ASIC Deputy Chair, said in the statement:
“These proceedings should send a message to the crypto industry that products will continue to be scrutinised by ASIC to ensure they comply with regulatory obligations in order to protect consumers.
ASIC’s action should be a reminder of the importance to comply with the design and distribution obligations so that financial products are distributed to consumers appropriately.”
The regulator informed Bit Trade of its failure to comply with DDO in June 2022, but the platform continues to offer the product to Australian customers without a target market determination.
According to the Notice of Filing, the ASIC seeks declarations, a monetary penalty, and injunctions halting Bit Trade’s alleged ongoing contraventions.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
