Australian Regulator Wins Court Case Against Crypto Exchange Kraken’s Bit Trade

The Australian Securities and Investments Commission (ASIC) has won its lawsuit against the Kraken crypto exchange.An Australian federal court ruled in favor of the securities regulator regarding Kraken's Bit Trade.

The court stated that Bit Trade failed to adhere to design and distribution obligations while offering its margin trading product. The entity also violated Australian laws by introducing products that act as credit facilities without due licenses.

Australian Federal Court Declares A Win For ASIC Over Kraken's Bit Trade

Australian Federal Court Justice John Nicholas read the judgment on August 23, pointing out how Bit Trade violated Australian securities laws. Bit Trade Pty is one of the leading crypto companies in Australia, and it is owned by the Kraken crypto exchange.

According to Justice Nicholas, Kraken's Bit Trade failed to comply with design and distribution obligations when operating its margin trading product.

The company didn't determine the target market for the product before offering it to retail customers, and such action violates the country's securities rules.

Further, the judge explained that Bit Trade's product is a credit facility. As such, the company offered this product without the necessary license from the regulator.

Justice Nicholas stated: The provision of a Margin Extension in national currency, including in Australian or US dollars, gives rise to a deferred debt' incurred by the customer when they are provided with the Margin Extension."

Moreover, the judge indicated that the product would become payable once the client loses eligibility for the margin extension. This trend repositions the product as a credit facility.

Notably, Australian laws demand the design and distribution obligations for entities before offering financial products.The rules laid out specific requirements that companies must follow in designing their products to meet consumers' pre-determined needs.

Also, according to regulatory processes, the product's distribution must follow a targeted plan. However, the court found that Bit Trade didn't follow the rules in its product offer.

Following the court's ruling, the judge gave Bit Trade and ASIC seven days to settle on declarations and injunctions.AISC revealed that it will request financial penalties against Bit Trade.

ASIC Declares Its Commitment To Deepen Crypto Regulation

In September 2023, ASIC sued Bit Trade, accusing the company of offering its margin trade product without conducting a target market determination.

Also, the regulator claimed that the product enables five-times credit extension for customers. So, it operates as a credit facility.

After the court's judgment, Sarah Court, ASIC Deputy Chair, reacted, noting that the case reflects the regulator's commitment to ensuring regulatory compliance in the Australian crypto sector.

Further, the ASIC Chair reiterated that the court's ruling serves as a salient reminder to crypto entities of the relevance of adhering to the design and distribution obligations.

Also, she said that the regulator upholds a legal requirement for the appropriate distribution of financial products to consumers.

On its part, Kraken expressed disappointment regarding the court's judgment. According to the exchange's spokesman, the decision reflects cryptocurrencies as novel technology.

However, the crypto exchange indicated its readiness to comply with the legal decision.

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