ASIC Files Lawsuit Against Binance Australia Over Investor Misclassification
The Australian Securities and Investments Commission (ASIC) has filed a lawsuit against Binance Australia Derivatives, accusing the exchange of misclassifying over 500 retail investors as wholesale clients.
According to an announcement, this misclassification took place between July 2022 and April 2023, denying customers essential consumer protections under Australian financial services laws.
Details of the Lawsuit
ASIC’s legal action in the Federal Court focuses on Binance Australia’s incorrect client classification while offering high-risk crypto derivatives. The exchange allegedly labeled 83% of its Australian clients as wholesale investors, removing their access to safeguards such as dispute resolution mechanisms and product disclosure statements. ASIC noted that Binance failed to comply with its financial services license conditions and neglected obligations to provide efficient, honest, and fair services.
ASIC Deputy Chair Sarah Court criticized Binance’s compliance systems as “woefully inadequate,” stating that many clients experienced significant financial losses due to these issues. This lawsuit follows a targeted review of Binance’s operations in Australia, which resulted in the cancellation of its financial services license in April 2023. Binance subsequently compensated affected clients approximately AUD 13 million ($8.29 million) for financial losses stemming from the misclassification.
A Broader Crackdown on Crypto Regulations
Despite the compensation, ASIC is pursuing penalties, declarations, and adverse publicity orders against Binance, seeking accountability for what it views as systemic failures in meeting legal and ethical standards in the Australian market. This lawsuit is part of ASIC’s broader initiative to enhance regulatory oversight within the crypto market.
Sarah Court emphasized that many digital assets qualify as financial products under current law, and ASIC is consulting with the sector to improve regulatory clarity. By November 2024, all crypto platforms operating in Australia will be required to obtain financial licenses.
Additionally, ASIC has updated guidelines for managing client assets, focusing on digital asset custody and improved oversight. The regulator has also taken legal actions against other major crypto players, including Kraken, which was fined AUD 8 million for offering unlawful margin trading products.