The Australian Securities and Investments Commission (ASIC) has filed a legal action against Binance Australia Derivatives, accusing this derivatives trading platform of violating user protection regulations.
In a press release on December 18, the regulator stated that Binance misclassified over 500 retail customers as professional investors from July 2022 to April 2023, causing them to lose legal protections provided under Australian financial law.
Allegations of user protection
According to ASIC, retail customers have the right to greater protections, including access to Product Disclosure Statements (PDS), Target Market Determinations (TMD), and internal dispute resolution processes.
ASIC Deputy Chair Sarah Court criticized Binance's compliance system as 'extremely deficient' and stated that many customers suffered significant financial losses due to a lack of proper protections.
Sarah Court – ASIC Deputy Chair
Alleged regulatory violations
The lawsuit lists several violations, including Binance's failure to issue PDS or TMD, lack of appropriate dispute resolution mechanisms, and failure to train staff to ensure compliance with financial services licenses. ASIC also accused Binance of not providing 'effective, honest, and fair' services.
In April 2023, after conducting a review of the exchange's operations, ASIC revoked Binance's financial services license in Australia 'at the organization's request'.
ASIC promotes licensing requirements for cryptocurrency
The case shows that ASIC is becoming increasingly concerned about the crypto industry. Recently, the agency fined Kraken's operator in Australia $12.8 million for regulatory violations. ASIC is also preparing new guidelines requiring exchanges to have financial services licenses under the Corporations Act.
In September, ASIC Commissioner Alan Kirkland also revealed that the regulator is preparing new guidelines requiring exchanges to have financial services licenses.
According to The Australian Financial Review (AFR), licensing requirements will not be limited to regulations related to digital currency exchanges.
Kirkland revealed this plan at the Crypto and Digital Assets summit organized by AFR in Sydney on September 23 and stated that the regulator understands that the Corporations Act includes major cryptocurrencies such as Bitcoin and ETH.
Meanwhile, Binance is facing allegations of intellectual property theft in the United States.
Mark Longo, the owner of 'Peanut the Squirrel', has sent a cease-and-desist letter to Binance, alleging that the exchange violated trademark related to his PNUT-themed memecoin.
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