ASIC sues Bit Trade over Kraken crypto exchange's margin trading product

The news: ASIC has commenced civil penalty proceedings in the Federal Court against Bit Trade, the provider of Kraken crypto. The regulator alleges Bit Trade failed to comply with design and distribution obligations for the margin trading product it offers Australian customers on the Kraken exchange.

The numbers: Bit Trade has offered its margin trading product to Australian customers via the Kraken exchange since January 2020. ASIC alleges that since the commencement of the design and distribution obligations on 5 October 2021, at least 1160 Australian customers have used the margin trading product incurring a total loss of approximately $12.95 million.

The context: ASIC’s case focuses on Bit Trade’s failure to make a target market determination for the product before offering it to Australian customers, as required by law. The regulator alleges Bit Trade’s margin trading product is a credit facility as it offers customers credit for use in the sale and purchase of certain crypto assets on the Kraken exchange. Bit Trade describes this as ‘margin extension’. Customers can receive an extension of credit of up to five times the value of the assets they use as collateral.

What they said: "These proceedings should send a message to the crypto industry that products will continue to be scrutinised by ASIC to ensure they comply with regulatory obligations in order to protect consumers," ASIC Deputy Chair Sarah Court said.