Key takeaways:
- The ASIC has sued Bit Trade for violating the design and distribution requirements for one of its trading products.
- Kraken’s Australian operations manager, Jonathon Miller, expressed astonishment and dismay at the action taken by ASIC.
Bit Trade, the Australian supplier of the Kraken cryptocurrency exchange, has sued the Australian Securities and Investments Commission (ASIC) for violating the design and distribution requirements for one of its trading products.
In a statement released on September 21, ASIC claimed that Bit Trade had neglected to identify its target market before making its margin trading product available to Australian clients.
Australian law imposes design and distribution obligations on businesses that provide financial products. The standards outline specific business requirements to create financial solutions that address consumers’ predetermined needs and then distribute them using a targeted strategy.
The agency asserted that at least 1,160 Australian consumers had used Bit Trade’s margin trading product since implementing design and distribution obligations in October 2021, resulting in a combined loss of almost $8.35 million (12.95 million Australian dollars).
ASIC claims that Bit Trade was warned in June 2022 that it had broken the rules, yet it allegedly continued to sell the goods without making the necessary decisions.
Kraken’s Australian operations manager, Jonathon Miller, expressed astonishment and dismay at the action taken by ASIC. He stated:
“We have been attempting to constructively engage with ASIC on this matter for some time to ensure our product offering remains compliant.”
The “margin extension” feature offered by Bit Trade’s margin trading product enables users to extend credit up to five times the value of the assets they employ as collateral.
According to the financial authority, this product functions as a “credit facility” since it gives clients “credit for use in the sale and purchase of certain crypto assets on the Kraken exchange.”
According to ASIC deputy chair Sarah Court, the proceedings should warn the cryptocurrency industry that financial products will continue to be examined by regulators to ensure they are consistent with the nation’s consumer protection laws.
“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.”
ASIC requests several legal remedies, including declarations, monetary fines, and injunctions that forbid allegedly illegal behavior. The initial case management hearing has not been given a date.
