ASIC is suing Binance Australia Derivatives for misclassifying over 500 retail customers as professional investors, causing them to lose their protective rights.
The Australian Securities and Investments Commission (ASIC) has officially sued Binance Australia Derivatives, the cryptocurrency derivatives trading branch of the global cryptocurrency exchange Binance, for serious violations of consumer protection regulations. The lawsuit occurs amid ASIC's increased oversight of the cryptocurrency market, reflecting efforts to protect investors in this nascent digital asset space.
According to a press release issued by ASIC on December 18, Binance Australia Derivatives is accused of misclassifying over 500 retail customers as professional investors during the period from July 2022 to April 2023.
The behavior above has stripped these customers of their rights to important statutory protections under Australian law, including the right to access the Product Disclosure Statement (PDS), Target Market Determination (TMD), and internal dispute resolution processes. These are essential tools that help retail investors understand risks and have mechanisms to protect their interests when participating in the derivatives market.
Enhancing oversight of the cryptocurrency market
ASIC Deputy Commissioner Sarah Court has openly criticized the compliance system of Binance Australia Derivatives as completely substandard. She also expressed concern that many customers have suffered significant financial losses due to inadequate protection. This indicates serious shortcomings in the risk management and regulatory compliance operations of Binance Australia Derivatives, raising questions about the exchange's responsibility to protect investor interests.
ASIC's lawsuit lists a series of regulatory violations, including Binance Australia Derivatives' failure to issue PDS or TMD, lack of effective dispute resolution mechanisms, and inadequate training of staff on regulatory compliance. ASIC also alleges that Binance Australia Derivatives did not provide services efficiently, honestly, and fairly, which directly violates fundamental principles of the financial market.
Notably, in April 2023, after reviewing the operations of Binance Australia Derivatives, ASIC revoked this platform's financial services license at the request of Binance itself. This move occurred before the lawsuit was announced, suggesting that Binance may have been aware of compliance issues in its operations.
The lawsuit against Binance Australia Derivatives is part of ASIC's campaign to enhance oversight of the cryptocurrency industry. Recently, ASIC fined the operator Kraken in Australia $12.8 million for regulatory violations. ASIC is also in the process of developing new guidelines requiring cryptocurrency exchanges to have a financial services license under the Corporations Act.
According to ASIC Commissioner Alan Kirkland, these licensing requirements will apply to major cryptocurrency assets such as Bitcoin and Ether.