Kraken’s Australian branch, Bit Trade, has found itself in hot water after being slapped with $5.1 million fine for breaching financial laws.
Australian regulators are tightening the screws on companies that don’t play by their rules.
Release the Kraken
The Australian Securities and Investments Commission, the ASIC took action against Bit Trade for issuing margin trading products to over 1,100 customers without properly assessing whether these products were suitable for them.
This is not the kind of news anyone wants to see while waiting for a holiday market rally.
The issue revolves around Bit Trade’s margin extension product, which practially acts like a loan, allowing customers to trade with more money than they actually have.
Unfortunately, this led to negative balances, to losses exceeding $5 million for some users because the company didn’t do the necessary checks to ensure these products fit their customers’ financial situations.
Pay the price
Originally, ASIC sought a $12.8 million penalty, but the court deemed that excessive and settled on $5.1 million instead.
Bit Trade had asked for a reduction to $2.5 million, but the judge felt that was too low.
Among those affected was an investor who lost nearly $4 million, prompting ASIC Chair Joe Longo to stress the importance of crypto firms adhering to regulations designed to protect consumers.
In its ruling, the Federal Court of Australia classified Bit Trade’s margin product as a credit facility, which means it should have followed specific regulations, including issuing a target market determination.
This is an official document that outlines which consumers are best suited for a financial product, and guess what? Bit Trade didn’t provide one.
Precedent rule?
This ruling is an important moment as it’s the first time such a fine has been handed down for failing to provide this public document. The company has been ordered to pay up within 60 days.
Kraken expressed disappointment over the ruling, suggesting that it could negatively impact Australia’s economy, but they remain committed to working with regulators and policymakers to ensure compliance moving forward.
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