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The Australian Securities and Investments Commission (ASIC) has taken strong action against Bit Trade Pty Ltd, Australian operator of the Kraken Cryptocurrency exchange platform. As a result of this action, the company has been fined $8 million for offering a margin extension product without proper Target Market Determination (TMD).
Federal court findings
Since October 2021, Bit Trade offered its clients a “margin extension” product that allowed loans to be made and repaid in digital assets such as Bitcoin or national currencies such as the US dollar. However, the Federal Court determined in August 2024 that this product qualified as a credit facility, requiring compliance with design and layout obligations (DDO), including a TMD.
The Court found that Bit Trade breached these obligations by offering the product to more than 1,100 Australian customers without the required TMD. This resulted in fee and interest charges of more than US$7 million, and trading losses for customers exceeding US$5 million. One notable case was that of an investor who lost almost $4 million dollars.
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Judge Nicholas noted that the company did not consider compliance with DDO regulations until ASIC intervened, reflecting “a seriously deficient compliance system”. Furthermore, he stressed that the violations were serious and motivated by a “desire to maximize income.”
Importance of this case for the crypto industry
This case marks an important precedent as it is the first time ASIC has imposed a fine under the DDO regulations for the lack of a TMD. ASIC Chairman Joe Longo emphasized that TMDs are essential to ensuring financial products are appropriate for consumers and do not cause them harm.
«The digital asset industry must ensure that it complies with current regulatory regulations. “This ruling highlights the importance of designing and promoting products responsibly to protect consumers,” Longo stated.
Implications for the future
In addition to the $8 million penalty, Bit Trade will also have to cover ASIC’s legal costs related to the case. This verdict comes at a key time, as the Australian regulator has begun consultations with the digital assets sector to update its guidance on when crypto products can be considered regulated financial products.
ASIC will continue to closely monitor digital asset companies using regulatory tools such as licensing, compliance and legal action. This case sends a clear message to the industry that non-compliance with regulations will not be tolerated.
The Bit Trade case underscores regulators’ growing concern to protect consumers in an emerging market that, despite its innovation, faces significant risks.
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