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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
— ASIC Media (@asicmedia) December 18, 2024
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 local brand of the Oztures Trading Pty Ltd in the
country.
This article was written by Damian Chmiel at www.financemagnates.com.
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