Australia’s Federal Court has imposed an Australia crypto fine of $5.1 million AUD on Bit Trade, the operator of the cryptocurrency exchange Kraken.
The court sided with the Australian Securities and Investments Commission (ASIC), which had accused Bit Trade of failing to comply with legal obligations regarding financial product design and distribution.
The judgment, delivered on December 12, was a result of Bit Trade’s actions regarding its margin extension product, which allowed users to trade cryptocurrencies or fiat with leverage.
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Bit Trade’s Margin Product Operated without TMD
Bit Trade’s product was offered without the legally required target market determination (TMD), a vital component designed to ensure that products are marketed to appropriate consumers.
Justice John Nicholas ruled that Bit Trade had acted as a credit facility without the necessary license.
The fine, though substantial, was lower than the $12.8 million penalty that ASIC had initially sought. Justice Nicholas described the ASIC request as “excessive,” but he also rejected Bit Trade’s argument for a fine as low as $2.5 million, stating that such a penalty would be insufficient.
ASIC had filed the lawsuit in September 2023, asserting that Bit Trade’s margin extension product allowed over 1,100 Australians to engage in high-risk leveraged trading without proper safeguards.
According to ASIC, users paid more than $7 million in fees and interest and collectively lost over $5 million, with one individual losing nearly $4 million.
JUST IN:
Australia fines Kraken’s operator $8M AUD ($5.1M USD) for regulatory violations.
The Federal Court ruled Bit Trade breached design and distribution obligations and operated as an unlicensed credit facility. pic.twitter.com/UiqhjXThV7
— Breaking Whale (@BreakingWhale) December 12, 2024
Australia fines Kraken’s operator $8M AUD ($5.1M USD) for regulatory violations.“This is a significant outcome,” ASIC Chair Joe Longo said. “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.”
Justice Nicholas remarked that Bit Trade’s conduct was driven by a desire to maximize revenue, with little regard for local regulations until after ASIC’s intervention.
He noted that once the company became aware of the legal requirements, it had the option to either issue a TMD or limit the product’s availability to non-retail clients but chose to continue offering it to retail investors.
Longo also stressed that many crypto products are likely covered by existing laws and must be marketed responsibly to ensure adequate protection for Australian consumers.
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Australia’s Corporate Regulator Proposes Costly Licensing For Crypto Firms
Last week, Australia’s Securities and Investment Commission (ASIC) unveiled a proposal to impose stringent licensing requirements on crypto firms.
The move aims to classify many digital assets as financial products, mandating firms handling them to obtain appropriate licenses.
Under current Australian laws, businesses offering financial services or dealing in financial products must secure an Australian Financial Services License (AFSL). Additionally, platforms facilitating the trading of these products may require an Australian Market License.
The new rules would extend these requirements to crypto exchanges and many other digital asset firms.
More recently, the Australian Transaction Reports and Analysis Centre (AUSTRAC) unveiled plans for a new task force aimed at cracking down on cryptocurrency ATM providers that may be violating anti-money laundering (AML) regulations.
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