The Australian Securities and Investments Commission (ASIC) has sued Bit Trade Pty, a partner of Kraken that services clients in Australia.
According to a statement issued by the regulator, Bit Trade has “failed to comply with the design and distribution obligations for the margin trading product it offers.”
Bit Trade has served Australia since 20202, offering a margin product via Kraken. Bit Trade, a subsidiary of Payward Inc., is registered with AUSTRAC.
ASIC states that Bit Trade’s margin trading product is actually a credit facility for the sale and purchase of digital assets on Kraken. The leverage is described as being 5x the value of the collateral.
ASIC Deputy Chair Sarah Court commented on the lawsuit:
‘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’s action should be a reminder of the importance to comply with the design and distribution obligations so that financial products are distributed to consumers appropriately.”
ASIC reports that at least 1160 Australian customers have used the margin trading product lsoing approximately $12.95 million.
ASIC said that it notified Bit Trade of its concerns regarding the failure to comply with the design and distribution obligations in June 2022. Meanwhile, Bit Trade is apparently continuing to offer the product to Australian customers.
ASIC is seeking declarations, pecuniary penalties, and injunctions prohibiting the ongoing alleged contravening conduct.