Australian Regulator Files Lawsuit Against Kraken Provider Over Margin Trading Product

The Australian Securities and Investments Commission (ASIC) has initiated legal proceedings against Bit Trade, the provider of the Kraken cryptocurrency exchange in Australia. The allegations stem from Bit Trade’s failure to adhere to design and distribution obligations (DDO) for one of its trading products.

According to a press release issued on September 21st by ASIC, the Australian financial regulatory body claims that Bit Trade did not establish a target market determination before offering its margin trading product to Australian customers.

DDO requirements are legally mandated for firms offering financial products in Australia. These obligations necessitate that firms design financial products meeting the predetermined needs of customers and distribute them through a specific plan.

“ASIC asserts that Bit Trade’s margin trading product is considered a credit facility, as it extends credit to customers for the purchase and sale of specific cryptocurrency assets on the Kraken exchange,” stated ASIC in an official statement.

ASIC further disclosed that Bit Trade has been offering its margin trading product to Australian customers through the Kraken exchange since January 2020. Moreover, the regulator alleged that, since the inception of the DDOs in October 2021, at least 1160 Australian customers have utilized Bit Trade’s margin trading product, resulting in a cumulative loss of approximately $8.35 million.

ASIC’s deputy chair, Sarah Court, emphasized, “These legal proceedings should serve as a clear signal to the cryptocurrency industry that ASIC will continue to scrutinize products to ensure compliance with regulatory obligations, with the goal of protecting consumers.”

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Disclaimer: The information provided in this article is for informational purposes only and should not be construed as financial or investment advice. Cryptocurrency investments are subject to market risks, and individuals should seek professional advice before making any investment decisions.