ASIC Claims Binance Misclassified 83% of Australian Client Base, Takes It To Court

The Australian Securities and Investments Commission (ASIC) has launched legal proceedings against Binance Australia Derivatives for allegedly misclassifying over 500 retail investors as wholesale clients, denying them crucial consumer protections.

Binance Australia Faces Federal Court Battle

The regulator alleges that between July 2022 and April 2023, Binance Australia Derivatives, a subsidiary of the world's largest cryptocurrency exchange, incorrectly classified 83% of its Australian client base as wholesale investors, exposing them to high-risk crypto derivative products without proper safeguards.

“Our case alleges Binance’s compliance systems were woefully inadequate and exposed more than 500 clients to high-risk, speculative products without the right consumer protections in place,” said ASIC Deputy Chair Sarah Court.

“Many of these clients suffered significant financial losses,” she added, noting that Binance had already paid approximately $13 million in compensation to affected clients in 2023.

The crypto exchange allegedly failed to provide essential consumer protections, including product disclosure statements and access to dispute resolution schemes. ASIC's legal filing outlines multiple compliance failures, including inadequate staff training and failure to ensure services were provided efficiently, honestly, and fairly.

More than 500 retail clients of Oztures Trading Pty Ltd, trading as Binance Australia Derivatives, were denied important consumer protections after being misclassified as wholesale clients, ASIC alleges in documents filed in the Federal Court. https://t.co/nw2TxSRR6x pic.twitter.com/Sm9nyBWjjE

In the meantime, ASIC also fined another popular crypto platform operating in the country, Kraken, for offering “unlawful” margin products. Local customers reportedly incurred trading losses of more than $5 million.

ASIC Tightens Crypto Regulations

This legal action comes amid heightened regulatory scrutiny of the digital asset sector in Australia. Earlier this month, ASIC released a consultation paper aimed at providing greater clarity on how financial product definitions apply to digital assets. From November 2024, all crypto exchanges operating in the country are required to have financial licenses.

Moreover, a week ago, the market regulator updated its guidelines for financial services firms managing client assets. These updates include stricter requirements for cryptocurrency custody and enhanced oversight of asset management practices.

“Many digital assets and related products are financial products under the current law,” Court commented. “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.”

The case follows ASIC's cancellation of Binance's Australian financial services license in April 2023, after a targeted review of the company's operations revealed significant compliance issues.

Binance Australia Derivatives is a local brand of Oztures Trading Pty Ltd in the country.