The Australian Securities & Investments Commission (ASIC) has commenced civil penalty proceedings in the federal court against Bit Trade, the company that provides the US based Kraken crypto exchange to Australian customers. ASIC alleges that Bit Trade failed to comply with the design and distribution obligations for one of its trading products, resulting in at least 1160 Australian customers who had used the margin trading product losing a total of $12.95 million.
ASIC deputy chair Sarah Court warned that the proceedings should serve as an admonition to the crypto industry, as the regulator is making a concerted effort to reign in and regulate the sector.
“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,” Court said. “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.”
Jonathon Miller, managing director of Kraken’s Australian operations, expressed surprise and dismay at ASIC’s lawsuit, saying the company had been working to ensure its product offering was compliant with the law.
“We are therefore both surprised and disappointed to have received today’s enforcement action. We believe this product is offered in compliance with Australian law and will continue our efforts to receive clarity on this matter,” Miller told Cointelegraph.
The lawsuit is focused on Kraken’s “margin extension” product, which it describes as a “margin extension” service that allows customers to receive an extension of credit up to five times the value of the assets they use as collateral. However, ASIC claims this product is a “credit facility” since it offers customers “credit for use in the sale and purchase of certain crypto assets on the Kraken exchange”.
Kraken advertises itself as a place where Aussies can “buy crypto with peace of mind” and states that it is “passionately focused on advancing the cryptocurrency industry for all Australians”. With ASIC’s lawsuit, it remains to be seen if this is indeed the case.
