Kraken fined $8M in Australia for unlawful margin trading

The Australian Securities and Investments Commission (ASIC) launched legal proceedings against the Australian operator of the Kraken crypto exchange. The Federal Court has ordered Bit Trade Pty Ltd (Kraken’s AUS operator) to pay $8 million for unlawfully offering a “margin extension” product without proper regulatory measures.

The watchdog alleged that the exchange illegally issued a credit facility to more than 1,100 Australian customers. The Federal Court found breaches of design and distribution obligations (DDO). ASIC Chair Joe Longo stated that “TMDs are vital to protect investors from inappropriate products. This outcome reminds digital asset firms of their compliance obligations under current law.”

Kraken’s AUS operator fined $8M

According to reports, over 1,100 customers used the margin extension product which helped the exchange to generate fees and interest of more than $7 million. Users’ losses have been calculated to be more than $5 million. One customer had lost nearly $4 million while trading. ASIC flagged the lack of a required target market determination (TMD).

It added that Bit Trade Pty Ltd, which operated the Kraken exchange, has been offering the “margin extension” product since October 2021. It was in August 2024 when the Federal Court found that Bit Trade’s product was a credit facility. A TMD was required by the product to offer margin extensions in national currencies.

Justice John Nicholas criticized Bit Trade’s “seriously deficient compliance system” and noted its breaches were “motivated by a desire to maximize revenue.” The firm continued offering the product despite knowing it likely breached the law.

ASIC intensifies crypto oversight

This landmark penalty highlights ASIC’s intent to regulate digital asset firms under existing laws. The penalty comes just after the watchdog pushed for industry consultation with the digital-assets sector. The agency is seeking industry feedback on draft updates to its guidance for such products. Meanwhile, Bit Trade must also pay ASIC’s legal costs. 

The watchdog notes that products, offered by the exchange, are captured under the current law. This suggests that these products need to be designed and marketed properly to the right users in order to ensure that Australians receive appropriate protection. This comes in as the United States moves toward pro-crypto regulations under the Donald Trump administration.

A Step-By-Step System To Launching Your Web3 Career and Landing High-Paying Crypto Jobs in 90 Days.