Australian regulator sues Kraken provider over margin trading product

The regulator alleged that Bit Trade — which is the provider for Kraken in Australia — did not make a target market determination before offering its margin trading product to Australian customers.

The Australian Securities and Investments Commission (ASIC) has commenced civil penalty proceedings against Bit Trade, the provider of the Kraken crypto exchange in Australia, for failing to comply with design and distribution obligations for one of its trading products. 

According to a Sept. 21 media release from ASIC, the Australian financial regulator alleged that Bit Trade did not make a target market determination before offering its margin trading product to Australian customers.

Design and distribution obligations (DDO) are a legal requirement for firms that offer financial products in Australia. The obligations set forward requirements for firms to design financial products that meet pre-determined needs of customers and then distribute them by way of a specific plan. 

“ASIC alleges that Bit Trade’s margin trading product is a credit facility as it offers customers credit for use in the sale and purchase of certain crypto assets on the Kraken exchange,” said ASIC in a statement.

According to ASIC, Bit Trade has offered its margin trading product to Australian customers via the Kraken exchange since January 2020. Additionally, the regulator alleged since the commencement of the DDOs in Oct. 2021, at least 1160 Australian customers had used Bit Trade’s margin trading product and had incurred a total loss of approximately $8.35 million.

“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,” said ASIC deputy chair Sarah Court.

This is a developing story, and further information will be added as it becomes available.