Kraken Australia’s operator, Bit Trade, must pay $5 million plus court costs after the Federal Court ruled in favor of the country’s corporate watchdog.
The Australian operator of Kraken, a cryptocurrency exchange based in the United States, was fined 8 million Australian dollars ($5.1 million) by the Federal Court of Australia after concurring with the country’s corporate regulator.
Bit Trade, which operates Kraken Australia, was ordered by Justice John Nicholas to pay the sanction and cover court costs within 60 days in a judgment issued on December 12.
The court determined that Bit Trade did not adhere to its design and distribution obligations and operated as a credit facility without a license.
Violation Of Market Regulations
Nicholas characterized the penalty as “excessive,” as it is less than the $12.8 million sought by the Australian Securities and Investments Commission (ASIC).
However, the judge found the sanction to be “insufficient,” as it exceeded Bit Trade’s request to restrict it to $2.5 million.
Kraken’s spokesperson informed Cointelegraph, “We are disappointed with the outcome of this case, but we are grateful that the court acknowledged our compliance efforts.”
Kraken stated, “We think that this case underscores the pressing necessity for custom crypto legislation to rectify the deficiencies that are resulting in confusion and uncertainty for Australian crypto investors and businesses.”
“We think that these rulings have a substantial impact on the growth of the Australian economy.”
Kraken’s Actions Are Criticized By ASIC
Nicholas had supported ASIC in its September 2023 lawsuit against Bit Trade, concluding that the company had provided a “margin extension” product that enabled users to trade crypto or fiat with leverage without the legally mandated target market determination (TMD).
In a statement issued on December 12, ASIC Chair Joe Longo stated that “target market determinations are fundamental in ensuring that investors are not inappropriately marketed products that could harm them.”
Longo also stated that the product was used by more than 1,100 Australians, resulting in a loss of over $5 million and a charge of over $7 million in fees and interest.
“One investor lost nearly US$4 million,” Longo stated.
“This is a substantial result,” Longo stated.
“This is the first penalty imposed by ASIC against an entity for failing to have a TMD, and it serves as a reminder for digital asset firms to consider their regulatory compliance obligations.”
Crypto Industry Is Currently Under Investigation
Nicholas stated in his order that he was “convinced that Bit Trade’s contraventions were severe and driven by a desire to maximize revenue.”
He stated that the margin extension was provided “without any consideration” of local corporate law “until after ASIC intervened.”
Nicholas stated that Bit Trade was obligated to either create a TMD or restrict the product’s availability to non-retail clients after ASIC mandated a TMD for the product.
He further stated, “Instead, it continued to provide the Product to retail clients.”
Longo stated in his statement that the regulator presumes that “many products” offered by crypto companies are “captured by the current law.”
He also stated that in order to guarantee that Australians receive the necessary protections, the products must be properly designed and marketed to the appropriate consumers.