Kraken’s Australian subsidiary, Bit Trade, has been hit with a $5.1 million fine after failing to meet Australian financial regulations.
The Australian Securities and Investments Commission (ASIC) took action against Bit Trade for offering margin trading products to over 1,100 customers without verifying if the products were suitable for their financial needs. This is part of a broader trend of governments intensifying oversight on the crypto industry.
Bit Trade’s margin trading product allowed users to trade with borrowed funds, but the company didn’t conduct necessary assessments to ensure it was a fit for customers. As a result, customers faced heavy losses, including one investor who lost almost $4 million. ASIC had initially sought a $12.8 million fine, but the court reduced the penalty to $5.1 million. Bit Trade’s attempt to reduce the fine to $2.5 million was denied.
The court ruled that Bit Trade’s product was effectively a credit facility, which required specific regulations, such as a “target market determination” document, which the company failed to provide. This fine is the first of its kind in Australia for such an oversight.
Kraken expressed dissatisfaction with the ruling, claiming it could harm Australia’s economy. Nevertheless, the company has pledged to work more closely with regulators moving forward.
This penalty highlights the growing pressure on crypto firms to ensure compliance with consumer protection standards. In light of recent challenges, Kraken has also decided to shut down its NFT marketplace, cut 15% of its workforce, and focus on new projects, including its planned Layer-2 blockchain, ‘Ink,’ set for a 2025 launch.
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