ASIC alleged that 83% of Binance Australia’s clients were wrongly classified, denying them critical safeguards such as dispute resolution and product disclosure.
By Chimamanda U. Martha
Edited by Julia Sakovich
Updated
3 mins read
The Australian Securities and Investments Commission (ASIC) has filed a lawsuit against Binance Australia Derivatives, accusing the crypto exchange of misclassifying more than 500 retail investors as wholesale clients.
According to an announcement on Wednesday, the alleged misclassification, which occurred between July 2022 and April 2023, resulted in customers being denied essential consumer protections under Australian financial services laws.
ASIC’s legal action, initiated in the Federal Court, centers on Binance Australia’s failure to classify its clients correctly while offering high-risk crypto derivatives products. According to ASIC, the exchange wrongly labeled 83% of its Australian client base as wholesale investors, stripping them of safeguards such as access to dispute resolution mechanisms and product disclosure statements.
The regulator also revealed that the company failed to comply with its financial services license conditions and neglected its obligations to provide efficient, honest, and fair services.
ASIC Deputy Chair Sarah Court described Binance’s compliance systems as “woefully inadequate” and said many clients suffered significant financial losses as a result.
ASIC’s lawsuit follows a targeted review of Binance’s Australian operations, which led to the cancellation of the company’s financial services license in April 2023.
Subsequently, Binance compensated affected clients to the tune of approximately AUD 13 million ($8.29 million) for financial losses caused by the misclassification.
Despite the compensation, ASIC is now seeking penalties, declarations, and adverse publicity orders against Binance. The regulator aims to hold the crypto giant accountable for what it views as a systemic failure to meet legal and ethical standards in the Australian market.
Meanwhile, the lawsuit is part of ASIC’s larger push to tighten regulatory oversight in the crypto market.
“Many digital assets and related products are financial products under the current law. We are consulting with the sector to improve regulatory clarity, and ASIC will continue to use the full range of regulatory and enforcement tools to safeguard consumers and uphold market integrity in the digital asset sector,” Sarah Court said.
Earlier this month, the regulator issued a consultation paper to clarify how existing financial product definitions apply to digital assets. By November 2024, all crypto platforms operating in Australia will be required to secure financial licenses.
Additionally, ASIC has recently updated its guidelines for managing client assets, placing greater emphasis on the custody of digital assets and improved oversight. The regulator has also pursued legal actions against other major crypto players, including Kraken, which was fined AUD 8 million for offering unlawful margin trading products.
Disclaimer: Coinspeaker is committed to providing unbiased and transparent reporting. This article aims to deliver accurate and timely information but should not be taken as financial or investment advice. Since market conditions can change rapidly, we encourage you to verify information on your own and consult with a professional before making any decisions based on this content.
Chimamanda is a crypto enthusiast and experienced writer focusing on the dynamic world of cryptocurrencies. She joined the industry in 2019 and has since developed an interest in the emerging economy. She combines her passion for blockchain technology with her love for travel and food, bringing a fresh and engaging perspective to her work.
