The Australian Securities and Investments Commission (ASIC) has commenced civil penalty proceedings in the Federal Court against Bit Trade Pty Ltd, provider of the Kraken crypto exchange to Australian customers.

ASIC alleges that Bit Trade failed to comply with the design and distribution obligations for the margin trading product it offers Australian customers on the Kraken exchange.

ASIC’s case focuses on Bit Trade’s failure to make a target market determination for the product before offering it to Australian customers, as required by law.

The regulator alleges that Bit Trade’s margin trading product is a credit facility as it offers customers credit for use in the sale and purchase of certain crypto assets on the Kraken exchange. Bit Trade describes this as ‘margin extension’. Customers can receive an extension of credit of up to five times the value of the assets they use as collateral.

Bit Trade has offered its margin trading product to Australian customers via the Kraken exchange since January 2020. ASIC alleges that since the commencement of the design and distribution obligations on 5 October 2021, at least 1160 Australian customers have used the margin trading product incurring a total loss of approximately $12.95 million.

The regulator notified Bit Trade of its concerns regarding the failure to comply with the design and distribution obligations in June 2022. Bit Trade continues to offer the product to Australian customers without a target market determination.

ASIC is seeking declarations, pecuniary penalty and injunctions prohibiting the ongoing alleged contravening conduct.

Bit Trade is registered with AUSTRAC. It is a subsidiary of Payward Incorporated.