FILE PHOTO: Kraken cryptocurrency exchange logo is seen in this illustration taken July 28, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
(Reuters) -Australia's corporate watchdog said on Thursday that the country's federal court ordered crypto exchange Kraken's local operator to pay an A$8 million ($5.1 million) fine for unlawfully issuing a credit facility to more than 1,100 customers.
The Australian Securities and Investments Commission (ASIC) initiated civil proceedings last year against Bit Trade, which operates the Kraken exchange in Australia, for failing to comply with rules for its margin trading product.
ASIC said that Bit Trade failed to determine the right customers for the margin trading product, resulting in losses of more than $5 million.
"Bit Trade issued its margin extension product to over 1,100 Australians who were charged fees and interest of more than US$7 million without considering if the product was appropriate for them," ASIC said in a statement.
Bit Trade's product allowed for margin extensions, a form of credit or loan, to be made and repaid in either digital assets like bitcoin or national currencies such as U.S. dollars.
The company was disappointed with the outcome of the case, a Kraken spokesperson said in an emailed statement.
"We believe these rulings significantly hamper growth in the Australian economy. We look forward to engaging constructively with policymakers and regulators as these rules are developed."
In August, the federal court found that the product was a credit facility, as it offered margin extensions in national currencies, which requires a mandatory public document-called target market determinations-setting out which class of consumer would be best suited for the product.
The penalty marks the first instance against an entity for failing to have a target market determination, the regulator said.
($1 = 1.5593 Australian dollars)
(Reporting by John Biju in Bengaluru; Editing by Sonia Cheema and Abinaya Vijayaraghavan)
