Australian Securities and Investments Commission (ASIC) is suing Binance Australia Derivatives for investor protection failure.
Binance Australia Derivatives has been accused of violating consumer protections in a lawsuit filed by the Australian Securities and Investments Commission. There was a misclassification of over 500 clients as wholesale clients in the derivatives exchange trading of Binance Australia as Oztures Trading Pty Ltd.
ASIC files a lawsuit against Binance Australia Derivatives
Binance Australia Derivatives has been sued by the Australian regulator ASIC, according to a press release issued on December 18. The regulator alleges that the exchange misclassified 505 retail investors wholesale by offering crypto derivative products.
Critical consumer protections were denied to Australian retail investors under Australian financial services laws from July 7, 2022, to April 21, 2023. This accounts for 83% of its Australian clientele.
ASIC asserts that consumer protections, such as access to a compliant dispute resolution scheme and a disclosure statement, are necessary for retail investors who trade crypto derivative products. Additionally, the regulator emphasized that Binance Australia Derivatives neglected to make a Target Market Determination (TMD) by its design and distribution obligations.
ASIC Deputy Chair Sarah Court alleged that “Binance failed to ensure that the services it provided under its Australian financial services license were provided efficiently, honestly, and fairly.”
Furthermore, it stated that Binance’s compliance systems needed to be improved and that investors were exposed to speculative, high-risk products that lacked consumer protections. Additionally, numerous clients have experienced substantial financial losses. The regulator asserts that the exchange must adhere to the terms of its license.
In 2023, Binance’s Australia arm encountered challenges
Binance’s Australian subsidiary has a history of regulatory challenges and disputes with the regulator. Binance Australia discontinued deposits and Australian dollars (AUD) withdrawals via bank transfer in June 2023.
In April, the Australian Securities and Investments Commission revoked Binance Australia Derivatives’ derivatives license. It investigated the exchange for incorrectly classifying traders as wholesale investors.
ASIC, the Australian regulator, recently published draft guidance that provides a more comprehensive understanding of the current definitions of financial products and the regulation of digital assets. Nevertheless, it was criticized by crypto industry experts, who foresaw a potential exodus of firms from the country.
