Australian regulator has commenced a lawsuit against Bit Trade Pty Ltd, the company behind the crypto exchange Kraken.
The ASIC said the margin trading product on Kraken is a credit facility and has resulted in over $12m in losses.
The regulator said its lawsuit against Bit Trade will send a message to other crypto entities in the country.
Australian Securities and Investments Commission (ASIC) has commenced a lawsuit against Bit Trade Pty Ltd, provider of the crypto exchange Kraken in Australia, for violation of its law and design requirements, an official statement details. According to the regulator, the default by Bit Trade has led to $12.95 million in losses.
In particular, the Australian regulator accused Bit Trade of failing to comply with its design and distribution obligations for margin trading products. As per the published statement, the obligation is required by law and also extends to products not considered financial products by the issuer.
According to the ASIC, the margin trading product on the Kraken exchange is a credit facility as it gives customers access to credit to trade certain crypto assets. Even though Bit Trade described the credit facility as a “margin extension, the regulator contended that it qualifies as a financial product that must follow the obligation required by law.
Notably, the design and distribution obligations require companies to make a target market determination for the product. This requirement is to be fulfilled before the product is offered to Australian customers.
As noted in the statement, the regulator accused Bit Trade of failing to meet these requirements. Furthermore, the ASIC said since the obligation was introduced in 2021, over 1160 Australian customers have used the margin trading product and incurred $12.95 million in losses.
Speaking on the development, ASIC Deputy Chair Sarah Court said, “These proceedings should send a message to the crypto industry that products will continue to be scrutinized by ASIC to ensure they comply with regulatory obligations in order to protect consumers.”
Before taking the legal route, ASIC said it repeatedly noted its concerns to Bit Trade to comply with the design and distribution. Alongside a fine, ASIC is seeking other penalties against Bit Trade, including a declaration and an injunction banning the margin trading product.
The post ASIC Drags Kraken Exchange To Court Over its Margin Trading Product appeared first on Coin Edition.