Australia’s federal court has ruled against Bit Trade, the Australian arm of Kraken’s crypto exchange, following a lawsuit filed by the Australian Securities and Investments Commission (ASIC).
The court determined that Bit Trade violated financial regulations by failing to meet design and distribution obligations and operating as an unlicensed credit facility.
The legal issues started in September 2023 when ASIC filed an application against Bit Trade. ASIC claimed that the margin trading product offered by Bit Trade was not accompanied by an appropriate target market determination, which is mandatory for any financial product in Australia.
As per the ruling made on August 23, Justice John Nicholas stated that Bit Trade failed to make this essential decision before releasing its product to retail clients, which is against the regulatory rules.
The design and distribution requirements in Australia are aimed at guaranteeing that financial products are suitable for certain target markets and sold through an appropriate method.
ASIC also argued that Bit Trade’s product through which customers could trade up to five times the value of the collateral provided was an unauthorized credit facility. Justice Nicholas also concurred with this view by affirming that the margin extension offered by Bit Trade resulted in a ‘deferred debt’ which is a credit facility under the law.
In the wake of the ruling, ASIC and Bit Trade have been granted a week to agree on declarations and injunctions. It is important to note that ASIC has expressed its desire to pursue financial penalties against Bit Trade.
This case is a good lesson for the crypto industry in Australia to pay attention to the financial regulations and make sure that its products are offered correctly.
Also Read: Australia’s ASIC Shuts Down 600+ Crypto Scams in 12 Months
