ASIC has commenced civil penalty proceedings in the Federal Court against Bit Trade, the provider of the Kraken cryptocurrency exchange to Australian customers.

The regulator has alleged Bit Trade failed to meet Design and Distribution Obligations for the margin trading product it offered on the Kraken exchange since 2023.

Specifically, the regulator claims that Bit Trade did not make a Target Market Determination – a requirement as part of DDO – for the product before making it available to Australian customers.

ASIC asserts that Bit Trade’s margin trading product essentially functions as a credit facility, offering customers credit for trading certain cryptocurrencies on the Kraken exchange. This credit can extend up to five times the value of the collateral customers use.

At least 1160 customers have used the margin trading product since the commencement of DDOs in October 2021, resulting in a total loss of approximately $12.95 million, according to the regulator.

ASIC first notified Bit Trade of its concerns regarding compliance with DDOs in June 2022; however, Bit Trade continued to offer the product to Australian customers without a TMD.

The date for the first case management hearing is yet to be scheduled by the Federal Court.

ASIC is seeking declarations, financial penalties, and injunctions to prevent Bit Trade from continuing the alleged misconduct.

Bit Trade is registered with AUSTRAC and operates as a subsidiary of Payward.

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