• ASIC accuses Binance Australia of misclassifying clients, denying them legal protections.

  • Binance faces allegations of failing to provide required disclosures, dispute mechanisms, and compliance.

  • ASIC steps up crypto regulation, pushing for licensing requirements and fines for breaches like Kraken's.

The Australian Securities and Investments Commission (ASIC) has initiated legal proceedings against Binance Australia Derivatives. The crypto derivatives platform allegedly misclassified over 500 retail clients as wholesale investors. This classification reportedly occurred between July 2022 and April 2023. This stripped affected clients of vital legal protections under Australian financial laws.  

Consumer Protections at Stake  

ASIC claims Binance denied retail clients access to essential consumer protections. Other regulations consist of a PDS, TMD, and adequate internal dispute resolution. ASIC Deputy Chair Sarah Court raised issues regarding Binance’s compliance regimes that she noted were weak. She further noted that several of her clients lost considerable sums of money because of inadequate safeguards.  

The lawsuit identifies multiple regulatory breaches by Binance. The platform allegedly failed to issue necessary PDS or TMD documents. Additionally, ASIC accuses Binance of providing inadequate dispute resolution processes and insufficient employee training to maintain compliance with its financial services license.

 Additionally, the regulator also accused Binance of not operating and providing services effectively, honestly, and fairly. In April 2023 the regulator ASIC withdrew the Australian financial service license from Binance after Binance requested it. This decision followed a review of the exchange’s operations.  

ASIC’s Focus on Crypto Regulation 

ASIC’s action against Binance aligns with its increasing scrutiny of the crypto industry. Recently, the regulator fined Kraken’s Australian operator $12.8 million for regulatory breaches. Moreover, ASIC plans to implement new guidelines requiring crypto exchanges to obtain financial services licenses under the Corporations Act.  

ASIC Commissioner Alan Kirkland revealed these plans at the AFR Crypto and Digital Assets summit in Sydney. He emphasized the regulator’s view that the Corporations Act encompasses significant crypto assets like Bitcoin and Ether. The licensing requirements are expected to extend beyond traditional digital currency exchanges.  

Besides its legal challenges in Australia, Binance faces intellectual property theft allegations in the United States. Mark Longo, the creator of Peanut the Squirrel, has accused Binance of trademark infringement concerning its PNUT-themed memecoin. Longo issued a cease-and-desist letter to Binance, escalating the dispute.  

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