ASIC accuses Binance Australia of misclassifying retail clients
ASIC sues Binance Australia for client misclassification
The Australian Securities and Investments Commission (ASIC) has filed a lawsuit against Oztures Trading Pty Ltd, operating under the name Binance Australia Derivatives, alleging that more than 500 retail clients were misclassified as wholesale clients between July 7, 2022, and April 21, 2023.
This misclassification reportedly deprived these clients of critical consumer protections required under Australian financial services laws.
Consumer protections allegedly denied
ASIC claims that 83% of Binance Australia’s client base, or 505 retail investors, were classified as wholesale clients. This allowed the platform to offer them crypto derivative products without adhering to necessary consumer protection measures.
“Our case alleges that Binance’s compliance systems were grossly inadequate, exposing more than 500 clients to high-risk speculative products without proper consumer protections. Many of these clients suffered significant financial losses,” said Sarah Court, ASIC Deputy Chair.
ASIC also revealed that affected clients incurred substantial financial losses, with Binance compensating approximately $13 million to these individuals in 2023.
ASIC’s allegations against Binance
ASIC accuses Binance of failing to:
Provide necessary disclosure statements to retail clients.
Determine a target market for its offerings.
Comply with internal dispute resolution requirements.
Ensure financial services were provided efficiently, honestly, and fairly.
Adequately train employees to ensure their competence.
The regulatory body is seeking penalties and adverse publicity orders against Binance.
Risks of crypto derivatives
Crypto derivatives are inherently risky and complex, making accurate client classification essential for enabling informed investment decisions. ASIC emphasizes the need for strict compliance in the digital asset sector, especially as crypto-related financial products gain popularity.
Changes in digital asset regulation
Earlier this month, ASIC released Consultation Paper 381, aiming to update Information Sheet 225 on digital assets and related financial products. The initiative seeks to clarify how existing financial product definitions apply to crypto assets, improving regulatory transparency and safeguarding consumers.
“ASIC will continue to use all regulatory and enforcement tools to protect consumers and uphold market integrity in the digital asset sector,” added Court.
The case against Binance underscores increasing regulatory scrutiny in the cryptocurrency space as global authorities work to ensure compliance and protect investors in this rapidly evolving market.
Meanwhile, according to DefiLlama, 2024 has been a record-breaking year for Binance, with users depositing over $24 billion on the cryptocurrency exchange.
