ASIC accuses Binance Australia of consumer protection failures, seeking penalties for misclassifying retail investors in crypto derivatives.
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| Australia’s ASIC sues Binance Australia Derivatives for misclassifying retail investors as wholesale clients, denying them consumer protections. Symbolic Image: ChicHue |
Sydney, Australia - December 18, 2024:
Australia’s corporate watchdog, the Australian Securities and Investments Commission (ASIC), has filed a lawsuit against Binance Australia Derivatives, the local derivatives business of cryptocurrency exchange Binance. The regulator alleges that the company misclassified hundreds of retail investors as wholesale clients, denying them crucial consumer protections.
According to ASIC, between July 2022 and April 2023, Binance incorrectly categorized 505 retail investors—accounting for approximately 83% of its local clientele—as wholesale clients. This misclassification allowed the company to avoid providing consumer safeguards mandated for retail clients.
Following a targeted review in April 2023, ASIC cancelled Binance Australia Derivatives’ financial services license. By November 2023, the regulator had facilitated compensation payments totaling AUD 13.1 million ($8.29 million) to 435 retail clients who were incorrectly classified.
"Crypto derivative products are inherently risky and complex, so it is critical that retail clients are classified correctly. Those classifications ensure they receive the required consumer protections," said ASIC Deputy Chair Sarah Court.
ASIC has announced its intent to pursue penalties, declarations, and adverse publicity orders against Binance Australia Derivatives.
Binance has yet to issue a response to the allegations.
The case comes amidst a broader crackdown on cryptocurrency exchanges in Australia. Earlier this month, the Federal Court fined Kraken's local operator AUD 8 million following ASIC-led civil proceedings.
This legal action underscores ASIC’s commitment to enforcing compliance in the fast-evolving and often turbulent cryptocurrency sector.