The Australian Securities and Investments Commission (ASIC) announced a fine against Bit Trade, the local operator of the U.S. cryptocurrency exchange Kraken. The company was fined 8 million Australian dollars (approximately 5.2 million U.S. dollars) for failing to comply with rules governing margin trading.
According to a ruling by the Federal Court of Australia, Bit Trade failed to comply with local laws requiring companies offering financial products to identify their target market and offer their services only to a limited group of customers. In addition to the fine, Bit Trade must also reimburse ASIC for its legal costs.
According to information from ASIC, Bit Trade has been providing margin trading services since October 2021, including settlements in Bitcoin, other digital currencies, and fiat currencies. In August, a court ruled that the products offered by Bit Trade qualify as credit instruments, which requires an analysis of the target audience before they can be offered. However, according to the regulator, Bit Trade violated these obligations, as more than 1,100 customers used its services without their investment capabilities being properly assessed.
According to ASIC Chairman Joe Longo, the total amount of fees and interest charged by Bit Trade to clients exceeded $7 million, while clients’ trading losses totaled more than $5 million. One investor suffered losses of nearly $4 million while engaging in margin trading on the Kraken platform.
"ASIC has achieved a significant victory. This is the first time a company has been fined for failing to comply with its obligation to analyze its target audience. This will serve as a reminder to all companies working with digital assets of the need to comply with regulatory requirements. Many of the products offered by crypto companies fall under existing legislation, and they must be offered properly to ensure the protection of Australians’ financial interests,” noted Joe Longo.
Last summer, similar allegations were made against the crypto platform eToro, which was accused of offering high-risk derivative instruments to a broad audience.