Kraken Australia Penalized
In its landmark decision on Dec. 12, the Federal Court of Australia fined Bit Trade, an operator of crypto exchange Kraken in that country, 8 million Australian dollars ($5.1 million). The fine is related to the firm’s serious breach of regulatory requirements involving statement of design and distribution of products and running a facility of credit without proper licence issuance.
Presiding Justice John Nicholas ordered Bit Trade to pay the fine within 60 days and to pay court costs. The decision is a turning point for regulatory enforcement in Australia’s cryptocurrency space.
Breach of Market Regulations
ASIC wanted the court to approve a $12.8 million fine, which it eventually deemed excessive. But the final settlement was well above Bit Trade’s request for a $2.5 million cap.
“We are grateful that the judge acknowledged our compliance work but frustrated with the result”, one Kraken spokesperson said after the settlement.
Kraken meanwhile emphasized that there is indeed a pressing need for detailed cryptocurrency regulation, which says the present regime causes uncertainty and deters industry development.
ASIC’s Criticism of Kraken’s Actions
The court sided with ASIC’s allegations that Bit Trade’s “margin extension” product—providing leveraged cryptocurrency and fiat trades was offered to retail clients without having a TMD. This deficiency subjected consumers to risks they did not need to face.
More than 1,100 Australians used the product, paying more than $7 million in fees and interest, while losing more than $5 million. ASIC Chair Joe Longo spoke to the importance of the case.
“This decision puts digital asset companies on notice that compliance must be a priority”, Longo said, adding that TMDs are an important investor protection mechanism.
Court’s Decision
Justice Nicholas characterized Bit Trade’s conduct as serious, driven by the pursuit of maximum revenue without regard for compliance with the law. The firm had kept offering the product to retail customers even after ASIC identified its deficiencies.
ASIC called on crypto companies to ensure proper product design and marketing to appropriate consumer segments, noting that many crypto offerings already fall under existing laws.
“This judgment emphasizes that crypto companies should bake regulatory compliance into their businesses”, Longo said.
