Australian regulator sues Binance over lacking consumer protection

Australian financial regulator Australian Securities and Investments Commission (ASIC) sued leading cryptocurrency exchange Binance.

Over 500 retail clients of Oztures Trading Pty — the company that Binance uses to operate in the region — “were denied important consumer protections after being misclassified as wholesale clients,” the regulator claims in its lawsuit. The ASIC announcement reads:

“ASIC alleges from 7 July 2022 to 21 April 2023, Binance offered crypto derivative products to 505 Australian retail investors who were misclassified as wholesale clients, representing 83% of its Australian client base.”

Australian Binance customers trading financial products—including crypto derivatives—have certain rights and consumer protections under Australian laws. Local retail investors have a right to a product disclosure statement and access to a compliant dispute resolution service. ASIC Deputy Chair Sarah Court said:

“Our case alleges Binance’s compliance systems were woefully inadequate and exposed more than 500 clients to high-risk, speculative products without the right consumer protections in place. Many of these clients suffered significant financial losses. In 2023, we oversaw compensation payments by Binance of approximately $13 million to affected clients.”

The court further highlighted that “crypto derivative products are inherently risky and complex, so it is critical that retail clients are classified correctly.” According to her, “those classifications ensure they receive the required consumer protections, and the information required to make an informed investment decision.”

The announcement follows recent reports that ASIC has ordered the local operator of cryptocurrency exchange Kraken to pay a fine of A$8 million ($5.1 million) for illegally offering a credit facility to over 1,100 customers. The regulator in question is increasing its pressure on crypto firms ever since it imposed license requirements on them back in late September.

The market has taken a hit over the last 24 hours, although it is hard to determine whether it is in any way related to ASIC’s regulatory actions. Bitcoin is trading at $103.820 after losing 2.65% over the last 24 hours.

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