ASIC sues Binance Australia Derivatives for incorrectly classifying more than 500 retail clients as professional investors, depriving them of protection rights.
The Australian Securities and Investments Commission (ASIC) has officially sued Binance Australia Derivatives, the cryptocurrency exchange Binance's crypto derivatives trading arm, for alleged serious violations of consumer protection regulations. The lawsuit comes as ASIC is intensifying its oversight of the cryptocurrency market, reflecting efforts to protect investors in this nascent digital asset sector.
According to the press release issued by ASIC on December 18, Binance Australia Derivatives is accused of incorrectly classifying more than 500 retail clients as professional investors between July 2022 and April 2023.
This action deprived these clients of important statutory protections in Australia, 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 the risks and have protection mechanisms when participating in the derivatives market.
Strengthening oversight of the cryptocurrency market
ASIC Deputy Chair Sarah Court strongly criticized Binance Australia Derivatives' compliance system as completely substandard. She also expressed concern that many clients have had to bear significant financial losses due to inadequate protection. This highlights serious deficiencies in Binance Australia Derivatives' risk management and regulatory compliance, raising questions about the exchange's responsibility in protecting investor interests.
ASIC's lawsuit lists a series of regulatory violations, including Binance Australia Derivatives' failure to issue a PDS or TMD, lack of an effective dispute resolution mechanism, and inadequate employee training on compliance. ASIC also accused Binance Australia Derivatives of not providing services in an efficient, honest, and fair manner, directly violating the fundamental principles of the financial market.
Notably, in April 2023, after reviewing Binance Australia Derivatives' operations, ASIC revoked the platform's financial services license at Binance's request. This action occurred before the lawsuit was announced, suggesting that Binance may have been aware of the compliance issues within its operations.
The lawsuit against Binance Australia Derivatives is part of ASIC's campaign to strengthen oversight of the cryptocurrency industry. Recently, ASIC fined the Australian operator of Kraken $12.8 million for regulatory violations. ASIC is also in the process of developing new guidelines that will require cryptocurrency exchanges to hold a financial services license under the Corporations Act.
According to ASIC Commissioner Alan Kirkland, these licensing requirements will apply to both major cryptocurrencies like Bit and ETH.
