The Australian Securities and Investment Commission (ASIC) has taken legal action against Oztures Trading Ltd, the operator of Binance Australia Derivatives, for allegedly failing to provide adequate customer protection measures. The regulator claims that over 500 retail investors were misclassified as wholesale clients, depriving them of essential consumer safeguards.
Between July 2022 and April 2023, ASIC alleges that Binance offered crypto derivative products to 505 Australian retail investors, constituting 83% of its local client base, while incorrectly categorizing them as wholesale clients. This misclassification reportedly allowed Binance to circumvent important protections mandated by Australian financial laws, such as access to disclosure statements and dispute resolution mechanisms.
Specifically, ASIC has accused Binance of neglecting to issue a product disclosure statement, failing to establish a target market for its products, and lacking an adequate internal complaint resolution system. Deputy Chair Sarah Court emphasized the potential financial harm inflicted upon clients as a result of Binance’s actions, noting that the exchange had previously compensated affected users with $13 million in 2023.
Court stressed the importance of correctly classifying retail clients to ensure they receive the necessary information to make informed decisions in a volatile market. She indicated that many digital assets and related products are classified as financial products under current law, and ASIC is working with the industry to enhance regulatory clarity. The regulator intends to utilize a range of regulatory and enforcement tools to protect consumers and uphold market integrity within the digital asset sector.
In response to the allegations, ASIC has stated its intention to pursue penalties, declarations, and adverse publicity orders against Binance. This legal action is part of ASIC’s broader efforts to enforce compliance within the crypto exchange sector. Recently, the regulator secured a significant legal victory against Bit Trade, the operator of Kraken Australia, imposing a $5 million fine for breaching regulations related to an unlawful credit facility.
ASIC’s proactive measures underscore its commitment to ensuring that exchanges operating in Australia adhere to financial laws and prioritize consumer protection. The regulator’s actions serve as a reminder to industry participants of the importance of regulatory compliance and maintaining the integrity of the financial system.