Australia’s securities regulator is suing Binance’s local subsidiary for allegedly misclassifying 505 retail investors as wholesale clients.

Retail Users Misclassified

Australia’s securities regulator is suing Binance’s local subsidiary for allegedly misclassifying 505 retail investors as wholesale clients, thus denying them appropriate consumer protections. In its lawsuit filed in federal court, the Australian Securities and Investments Commission (ASIC) alleges the misclassification occurred from July 7, 2022, to April 21, 2023.

According to a Dec. 18 statement, as many as 83% of Binance Australia Derivatives’ users were affected. Commenting on the regulator’s decision to pursue the cryptocurrency exchange platform, ASIC Deputy Chair Sarah Court said:

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. Many of these clients suffered significant financial losses. In 2023, we oversaw compensation payments by Binance of approximately $13 million to affected clients.

She added that the inherent risks associated with crypto derivative products require operators to correctly classify retail users. This ensures they receive the required consumer protections. Additionally, correct classification provides users with the right information to make informed investment decisions.

As outlined in ASIC’s statement, Australian financial services laws compel operators like Binance to provide retail clients trading crypto derivatives with key protections. These include the right to a product disclosure statement, access to dispute resolution, and a target market determination by the provider.

The regulator’s confirmation of its pursuit of Binance’s Australian affiliate comes just days after a court ruling in its favor in the case against Kraken. As reported by Bitcoin.com News, Kraken was fined $5.1 million for offering a margin lending product to Australian customers without a target market determination.

Meanwhile, the ASIC deputy chair reiterated the regulator’s assertion that many digital assets and related products are financial products under current law. She added that the ongoing consultation process aims to improve regulatory clarity.
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