Australian Regulator Initiates Civil Proceedings Against This Crypto Company

The Australian Securities and Investments Commission (ASIC) has initiated civil proceedings against Bit Trade Pty Ltd.

The company allegedly failed to comply with design and distribution obligations (DDO) for its margin trading product, a violation that has led to significant customer losses.

ASIC Pursues Legal Action for Alleged DDO Violations

According to a Sept. 20 filing, the Australian Securities and Investments Commission has begun legal proceedings against Bit Trade Pty Ltd, the firm responsible for delivering the Kraken cryptocurrency exchange services to Australian clients.

The DDO framework, established to safeguard consumers, requires firms to design financial products that cater to the needs of customers and distribute them in a targeted and responsible manner. ASIC’s allegations against Bit Trade revolve around the failure to make a target market determination for its margin trading product before offering it to Australian customers, as required by law.

Bit Trade’s margin trading product, which ASIC claims operates as a credit facility, provides customers with credit to buy and sell select crypto assets on Kraken. This extension of credit can be as high as five times the value of the assets used as collateral, potentially amplifying financial risks for consumers.

The regulator disclosed that, since the start of the DDO in October 2021, at least 1,160 customers had used Bit Trade’s margin trading product, resulting in a cumulative loss of approximately A$12.95 million ($8.35 million). ASIC’s civil proceedings against Bit Trade aim to address these alleged lapses in compliance.

ASIC’s Deputy Chair Emphasizes Regulatory Scrutiny

ASIC Deputy Chair Sarah Court emphasized the importance of regulatory scrutiny in protecting consumers within the cryptocurrency sector. Court remarked, “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.”

Bit Trade has offered its margin trading product to Australian customers via Kraken since January 2020. Despite ASIC’s concerns raised in June 2022, the company continues to provide the product without establishing a target market determination, which is essential for responsible distribution under the DDO.

In response to the allegations, ASIC is seeking declarations, monetary penalties, and injunctions to stop Bit Trade’s ongoing conduct. The date for the first case management hearing is yet to be scheduled by the Court.