Catenaa, Thursday, December 19, 2024 – The Australian Securities and Investments Commission (ASIC) has filed a lawsuit against Binance Australia Derivatives, alleging that the platform misclassified over 500 retail clients as wholesale investors, stripping them of essential consumer protections.
Between July 2022 and April 2023, Binance reportedly misclassified 83% of its Australian customer base, exposing them to high-risk crypto derivatives without safeguards like a Product Disclosure Statement or a Target Market Determination.
These tools are required by Australian financial laws to inform and protect retail investors.
ASIC Deputy Chair Sarah Court criticized Binance’s compliance systems as “woefully inadequate,” emphasizing that proper client classification is critical for protecting investors from complex financial products.
The regulator accused Binance of violating its financial services license by failing to operate fairly, train employees adequately, and implement effective internal systems.
ASIC also alleged that Binance’s actions left retail clients without proper dispute resolution mechanisms.
In response, Binance claimed it identified a “small number” of misclassified users and compensated affected clients with $13 million in 2023.
The company also stated it immediately closed misclassified users’ derivative positions in accordance with regulations.
ASIC canceled Binance’s derivatives license in April following a targeted review initiated after the exchange admitted to classification errors.
The lawsuit seeks penalties, declarations, and adverse publicity orders against the exchange.
This legal action adds to ASIC’s recent crackdown on the crypto industry, including a $5.1 million fine against Kraken’s local operator for unlawful margin trading.
