Australia Hits Kraken Operator With Massive Fine – Here’s Why

The Australian Federal Court has ordered Bit Trade, the Australian-based operator of Kraken, to pay a fine of AU$8 million (US$5.1 million). The fine arises from the company’s non-adherence to certain important financial rules provided by the Australian Securities and Investments Commission (ASIC). This judgment made on Dec 12 shows that it is necessary to follow the country’s financial norms.

ASIC’s Case Against Bit Trade

Justice John Nicholas, an Australian Federal Court Judge, found that Bit Trade had breached the design and distribution undertaking. He also discovered that the company was functioning as an unlicensed credit provider. The fine has to be paid within 60 days, and Bit Trade has also been ordered to pay the costs of the proceedings.

The penalty is less than the AU$12.8 million that ASIC was initially going to claim from the company, which Nicholas called excessive. However, the fine is higher than the AU$2.5 million that Bit Trade offered to pay, and the judge considered it too low.  

The case is based on Bit Trade’s “margin extension,” which enables clients to trade cryptocurrencies and fiat with leverage. ASIC contended that the product didn’t have a determination of the target market (TMD). More than 1,100 Australians have used the product, with total fees and interest charges of over AU$7 million.

According to the claim, one investor lost almost 4 million dollars. ASIC Chair Joe Longo said the case is a reminder that financial products should not be sold to investors who may need help understanding the risks involved. Longo said in a statement:

“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.”

AUSTRAC’s AML/CTF Proposals

On Dec 11, the Australian Transaction Reports and Analysis Centre (AUSTRAC) proposed improvements to the existing framework. These changes focus on enhancing the Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) regulations.

These new rules are meant to increase supervision of high-risk areas such as cryptocurrency exchanges. The proposals, published for public comments until February 2025, are expected to enhance customer due diligence and reporting standards.

This also entails changing rules on cross-border transactions in the cryptocurrency space. AUSTRAC’s new framework aims to eliminate compliance costs while promoting one-stop transparency in cross-border transactions.