Australia’s ASIC fines Kraken operator Bit Trade $5M for regulatory breaches

On Dec 12, 2024

The Australian Securities and Investments Commission (ASIC) has fined Bit Trade—the operator behind the Kraken exchange—$5 million for unlawfully issuing a credit facility, according to a Dec. 12 statement.

The penalty follows a federal court ruling that found the company in breach of regulatory obligations.

Per the statement, Bit Trade offered a “margin extension” product to over 1,100 Australian customers starting in October 2021. This product enabled users to access extended trading limits, with repayments allowed in digital assets like Bitcoin or traditional fiat currencies.

However, the court determined that the offering constituted a credit facility, which required a target market determination (TMD) under Australia’s design and distribution obligations (DDO). Bit Trade failed to meet this requirement, leading to significant compliance violations.

The court revealed that Bit Trade collected more than $7 million in fees and interest from its customers. Despite these earnings, trading losses exceeded $5 million, with one investor reportedly losing over $4 million.

Justice Nicholas, who presided over the case, stated that the company prioritized revenue over regulatory adherence. He noted that compliance measures were only addressed after ASIC’s intervention.

As a result, Justice Nicholas ordered Bit Trade to pay an AUD 8 million penalty (approximately $5 million) and cover ASIC’s legal costs.

ASIC Chair Joe Longo emphasized that target market determinations are essential for safeguarding consumers and ensuring financial products are marketed responsibly. He highlighted that this penalty, the first related to TMD breaches, warns other firms about the consequences of neglecting compliance.

He stated:

“ASIC believes many products offered by digital assets firms are captured by the current law, which means those products need to be properly designed and marketed to the right consumers to ensure Australians receive appropriate protections.”