The Australian regulator sued Binance Australia Derivatives for misclassifying 500+ retail clients, denying them crucial legal protections.
The Australian Securities and Investments Commission (ASIC) has initiated legal proceedings against Binance Australia Derivatives, a crypto derivatives trading platform, on the basis of allegations of critical consumer protection failings.
The regulator claimed in a press release on December 18 that Binance misclassified more than 500 retail clients as wholesale investors between July 2022 and April 2023, thereby depriving them of the legal protections they were entitled to under Australian financial laws.
Complaints Regarding Consumer Protection
Retail clients are entitled to enhanced consumer protections, such as access to a Product Disclosure Statement (PDS), a Target Market Determination (TMD), and internal dispute resolution procedures, according to the filing by ASIC.
Sarah Court, the Deputy Chair of ASIC, expressed her dissatisfaction with Binance’s compliance systems, stating that they were “woefully inadequate.”
She also stated that numerous clients experienced substantial financial losses as a result of the lack of adequate protections.
Supposed Regulatory Violations
The lawsuit delineates numerous regulatory violations, such as Binance’s failure to issue a PDS or TMD, insufficient dispute resolution mechanisms, and a lack of employee training to ensure compliance with its financial services license.
ASIC also accused Binance of not providing services in a manner that was “efficient, honest, and fair.”
ASIC revoked Binance’s Australian financial services license in April 2023 after conducting an operation evaluation of the crypto exchange. This action was taken in response to a request to cancel from the entity.
ASIC Will Require Crypto Licensing
The case is indicative of ASIC’s increasing emphasis on the cryptocurrency sector.
Kraken’s Australian operator was recently fined $12.8 million by the regulator for regulatory violations.
ASIC is also in the process of developing new guidelines that will mandate that crypto exchanges obtain financial services licenses under the Corporations Act.
In September, Alan Kirkland, the Commissioner of ASIC, announced that the regulator was in the process of developing new guidance that would mandate that crypto exchanges obtain financial services licensing.
The Australian Financial Review (AFR) has stated that the licensing requirements will expand beyond those associated with digital currency exchanges.
Kirkland disclosed the authority’s intentions at the AFR Crypto Crypto and Digital Assets summit in Sydney on Sept. 23.
He stated that the regulator believes that the Corporations Act encompasses significant crypto assets, such as Bitcoin and Ether.
In the interim, Binance is confronted with allegations of intellectual property thievery in the United States.
Binance has been accused of trademark infringement by Mark Longo, the proprietor of Peanut the Squirrel, in connection with its PNUT-themed memecoin. He has issued a cease-and-desist letter to Binance.
