🌎 Binance Australia Accused of Misclassifying Crypto Clients

Australian regulators have accused Binance’s Australian arm of misclassifying over 500 retail clients as wholesale clients, leaving them exposed to high-risk crypto assets without adequate consumer protection.

Regulatory Issues with Binance Australia

The Australian Securities and Investments Commission (ASIC) has alleged that Binance Australia Derivatives failed to provide the necessary consumer protection for these clients, who were exposed to high-risk crypto assets between July 7, 2022, and April 21, 2023.

According to Australian financial services laws, firms are required to provide retail clients with a product disclosure statement and give them access to a compliant dispute resolution scheme. ASIC claims that Binance failed to do so for 83% of its Australian client base during the specified time period.

Failings in Customer Protection

ASIC Deputy Chair, Sarah Court, stated that Binance failed to ensure proper customer protection for its services in accordance with the Australian financial services license, which Binance Australia held before it was cancelled in April 2023.

“Many of these clients suffered significant financial losses. In 2023, we oversaw compensation payments by Binance of approximately $13 million to affected clients.”

ASIC also accused Binance of failing to make a target market determination, not having a compliant internal dispute resolution system, and being unable to ensure its employees were “competent to provide the financial services provided”.

Regulatory Action

As a result of these allegations, ASIC will take further legal action by seeking penalties, declaration, and adverse publicity orders.

“We are consulting with the sector to improve regulatory clarity, and ASIC will continue to use the full range of regulatory and enforcement tools to safeguard consumers and uphold market integrity in the digital asset sector,” added Court.

Background to the Investigation

ASIC cancelled the Australian financial services (AFS) license held by Binance Australia Derivatives in April 2023, following a request from the firm. In July 2023, Australian authorities launched a raid on the office of Binance Australia’s derivatives division as part of an extensive investigation conducted by ASIC.

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