The Federal Court of Australia has imposed an AUD 8 million ($5.1 million) fine on Bit Trade, the Australian operator of U.S.-based cryptocurrency exchange Kraken, after ruling in favor of the Australian Securities and Investments Commission (ASIC). The judgment, delivered on Dec. 12, marks a landmark decision in ASIC’s crackdown on crypto firms operating outside regulatory boundaries.
Justice John Nicholas ordered Bit Trade to pay the fine within 60 days and cover associated court costs. The court found the company in violation of design and distribution obligations and operating as a credit facility without proper licensing.
The penalty, though significant, falls short of the AUD 12.8 million sought by ASIC, which Justice Nicholas deemed “excessive.” However, it surpasses Bit Trade’s proposed fine of AUD 2.5 million, which the judge described as “insufficient.”
Kraken Responds to Court Decision
A Kraken spokesperson acknowledged the ruling in a statement, expressing mixed sentiments. “We appreciate the court recognized our compliance efforts, but are disappointed with the outcome of this case,” the spokesperson said.
Kraken emphasized the broader implications of the judgment, calling for tailored crypto regulations. “This case highlights the urgent need for bespoke crypto legislation to address the confusion and uncertainty for Australian crypto investors and businesses,” the statement read. “We believe these rulings significantly hamper growth in the Australian economy.”
ASIC’s Claims and Court Findings
ASIC’s case against Bit Trade, filed in September 2023, focused on Kraken Australia’s “margin extension” product. This offering allowed users to trade crypto or fiat with leverage but failed to include a legally required target market determination (TMD).
ASIC Chair Joe Longo highlighted the importance of TMDs in protecting investors. “Target market determinations are fundamental in ensuring that investors are not inappropriately marketed products that could harm them,” Longo stated.
According to ASIC, over 1,100 Australians used the margin product, incurring more than AUD 7 million in fees and interest while collectively losing over AUD 5 million. One investor reportedly lost nearly USD 4 million.
“This is a significant outcome,” Longo said, underscoring the precedent set by the case. “It is ASIC’s first penalty against an entity for failing to have a TMD and a reminder for digital assets firms to consider their regulatory compliance obligations.”
