The Kraken operator lost the case in Australia due to marginal business production
Key receivers
BitTrade failed to meet design and distribution obligations for its margin trading product. ASIC plans to seek fines against Kraken's Australian operator.
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Australian Kraken exchange operator BitTrade Pty has lost a case in the Federal Court of Australia over its margin trading product. According to Reuters, Australia's corporate regulator ruled that BitTrade failed to comply with design and distribution obligations.
The Australian Securities and Investments Commission (ASIC) launched civil proceedings against BitTrade in September 2023, alleging the company failed to make target market decisions before offering its products to customers.
“Today's result sends an important reminder to the crypto industry about the importance of complying with design and distribution obligations.” “It is a legal requirement for financial products to be fairly distributed to consumers,” ACC Vice Chair Sarah Court said.
ASIC's case argued that the obligation to repay a digital asset or national currency is a deferred debt, making the product a credit institution.
A Kraken spokesperson responded to the verdict saying, “We are disappointed by today's ruling overall, but we are prepared and willing to comply with the court's decision.”
ASIC and BitTrading have been given seven days to agree on the disclosures and orders. The regulator plans to seek financial penalties against the operator later.
This legal setback for Kraken in Australia resulted in November 2023 when the US Securities and Exchange Commission accused Kraken of operating a crypto trading platform without proper registration.
In the case, Kraken argued that the regulator was attempting to expand the scope of regulation by using well-defined legal terms such as investment “concept” and “ecosystem” over vague terms such as “investment contract” and “enterprise”.
Specifically, the exchange noted that the SEC's approach would result in a major reorganization of the U.S. financial regulatory structure, turning any sale of a digital asset or commodity into an investment contract at the agency's discretion.
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