Binance-logo-smartphone-gID_7.jpg@png” />
In summary
- ASIC filed a lawsuit against Binance Australia for misclassifying retail clients as wholesale.
- Binance failed to provide essential legal protections, exposing customers to risky derivative products.
- In April, ASIC canceled Binance’s license following errors in customer classification and regulatory compliance failures.
The Australian Securities and Exchange Commission (ASIC) has launched legal proceedings against Binance Australia Derivatives, accusing the platform of misclassifying retail investors and denying them essential consumer protections.
Between July 2022 and April 2023, Binance classified more than 500 retail clients — 83% of its customer base in Australia — as wholesale investors, according to the agency’s statement.
The error deprived these investors of crucial legal protections under Australian financial laws and exposed them to high-risk financial products, the regulator said on Wednesday.
Under Australian regulations, retail customers are entitled to consumer protections such as a Product Disclosure Statement (PDS), a Target Market Determination (TMD), and access to an internal dispute resolution system.
The PDS details the terms, benefits and risks of financial products, and a TMD ensures that products are only offered to appropriate audiences.
ASIC alleges that Binance failed to provide these safeguards, allowing customers to trade speculative and complex crypto derivative products without adequate support.
The Australian regulator claims that Binance breached multiple obligations, including its duty to operate efficiently, honestly and fairly under its Australian financial services license.
ASIC also accused the platform of failing to properly train its employees and neglecting the conditions of its license.
It also alleged that Binance’s internal systems did not provide the required protections for retail investors. The Cryptocurrency exchange was reported to have compensated affected customers with approximately $13,333 in 2023.
ASIC Vice President Sarah Court described Binance’s compliance systems as “woefully inadequate”, pointing out how misclassification exposed customers to high-risk speculative products without appropriate safeguards.
“Cryptocurrency derivative products are inherently risky and complex, so it is critical that retail customers are properly classified,” Court said. “These ratings ensure they receive the required consumer protections and information necessary to make an informed investment decision.”
In response to these breaches, ASIC is seeking sanctions, declarations and adverse publicity orders.
In April last year, ASIC canceled Binance Australia Derivatives’ operating license, following a “targeted review” of Binance that began in February.
The review was prompted after Binance publicly admitted to a client classification error on Twitter, writing “Under Australian regulation, we were required to inform these users and close any of their derivatives positions with immediate effect.”
“It has not yet reported these matters to ASIC in accordance with its obligations under its Australian Financial Services License,” an ASIC spokesperson later told Decrypt.
In July 2023, the Australian regulator reportedly conducted searches at the exchange’s local offices as part of its investigation into the exchange’s now-defunct local derivatives business.
This lawsuit comes amid growing ASIC scrutiny of the cryptocurrency sector. Last week, the agency fined local Kraken operator $5.1 million for illegally offering margin trading to retail clients.
As part of its regulatory initiatives, ASIC introduced consultation document INFO-225 this month. Public comments will be collected through February 2025, with updated guidance scheduled for release later in the year.
Edited by Stacy Elliott.
Daily Debrief Newsletter
Start every day with the top news stories right now, plus original features, a podcast, videos and more.
For the Latest Crypto News, Follow ©KeynoteUSA on Twitter Or Google News.
Disclaimer: Please note that the information provided on this page is for News purposes only and should not be considered investment or trading advice. ©Crypto.keynoteusa.com strongly recommends that you conduct independent research and/or consult with a qualified professional before making any investment decisions.
