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Meghalya Pant 159 days, 7 hours ago


An Australian Regulator Filed A Lawsuit Against Kraken For Causing $12.95M In Damages To Users

Kraken Exchange Faces Regulatory Approval

The Australian Securities and Investments Commission (ASIC) has filed a lawsuit against Bit Trade, the Australian supplier of the Kraken cryptocurrency exchange. ASIC claims Bit Trade didn’t succeed in meeting design and distribution standards for its margin trading business.

Firms selling financial products in Australia are required to meet design and distribution criteria. They require businesses to create financial goods that satisfy the specified demands of their clients and deliver them through customized programs.

ASIC says that Bit Trade did not conduct a target market analysis before launching its margin trading product. Customers can get credit up to five times the value of the collateral they use for trading.

ASIC Media on Twitter: "We are suing Bit Trade, provider of the Kraken crypto exchange in Australia, for allegedly failing to comply with the design and distribution obligations (DDO) for its margin trading product. Since October 2021, customers have lost about $12.95 million https://t.co/MCRYqah0dP pic.twitter.com/zURQ2xDw7M / Twitter"

We are suing Bit Trade, provider of the Kraken crypto exchange in Australia, for allegedly failing to comply with the design and distribution obligations (DDO) for its margin trading product. Since October 2021, customers have lost about $12.95 million https://t.co/MCRYqah0dP pic.twitter.com/zURQ2xDw7M

Is Australia Cracking Down on Crypto?

In addition, Bit Trade is the Australian supplier of the Kraken cryptocurrency exchange. According to Reuters, the Australian Securities and Investment Commission has filed civil actions against the firm for

“Failing to comply with design and distribution obligations for its margin trading product.”

According to ASIC, the cryptocurrency exchange failed to develop a “target market determination” for the item before introducing it. Margin trading is a credit facility that allows clients to purchase and sell specific crypto assets on Kraken.

Based on the Crypto regulation, customers can get up to five times the worth of the assets they offer as a guarantee. Furthermore, at least 1,160 consumers had utilized the margin trading product, according to the company.

Since the product’s release in October 2021, they have lost a total of around $US8.35 million. According to the media outlet, ASIC is looking for statements, monetary fines, and orders barring Bit Trade’s further activity.

Furthermore, ASIC Deputy Chair Sarah Court stated:

“These processes ought to deliver an alert to the crypto industry that products are going to be scrutinized by ASIC to guarantee they meet legal requirements to safeguard customers,”

said a spokesperson for ASIC.

Jonathon Miller, Kraken’s local managing director, told the AFR:

“We are both shocked and dismayed by today’s enforcement action. We think this product is supplied by Australian legislation, and we are going to seek clarification on this topic.”

Recently the troubled Hong Kong cryptocurrency exchange JPEX has filed for deregistration in Australia. Hong Kong officials pounced on JPEX earlier this month, detaining staff on allegations of fraud for maintaining an unauthorized cryptocurrency exchange.

Crypto Performance Graph

Share of people who own cryptocurrency in Australia 2019–2022. Source: Statista

Legal Action For Infringement Of Design And Distribution Obligations

According to ASIC, at least 1,160 Australian consumers have utilized Bit Trade’s margin trading product since the implementation of design and distribution responsibilities in October 2021, resulting in a total loss of $8.35 million (12.95 million Australian dollars).

Despite being warned in June 2022 that it had failed to meet these duties, Bit Trade reportedly continued to market the product without making the requisite assessments.

Sarah Court, Deputy Chair of ASIC, underlined the necessity of adhering to design and distribution obligations. According to her, the regulator’s move serves as a reminder to the cryptocurrency business to follow consumer protection legislation.

The case also raises concerns about how certain cryptocurrency products and services are classified under current banking rules. In this case, ASIC claims that Bit Trade’s margin trading product is a “credit facility” since it allows clients to trade crypto assets on the Kraken exchange using credit.

Closing Thoughts

ASIC revoked FTX Australia’s license, preventing it from operating as a cryptocurrency exchange and affecting 30,000 consumers at the time. Kraken, BTC Markets, Swyftx, and Coinbase are among the Australian cryptocurrency exchanges. Furthermore, they continue to patiently wait for the government to implement legislation to oversee the industry.

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Kraken Exchange Faces Regulatory Approval Hurdles in Australia was originally published in Invest Gaming Journal on Medium, where people are continuing the conversation by highlighting and responding to this story.

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