Binance Pays $8.2M to Settle Australian Regulator Over Consumer Protection Failures

The Australian derivatives arm of the world’s largest crypto exchange, Binance, is facing backlash from the local securities regulator over its failure to handle consumer protection issues properly.

According to an official release, the Australian Securities and Investments Commission (ASIC) has sued Binance Australia Derivatives, also known as Oztures Trading Pty Ltd, for offering crypto derivative products to local retail investors who were misclassified as wholesale clients.

ASIC Sues Binance Australia Derivatives

The ASIC alleged that from July 7, 2022, to April 21, 2023, Binance Australia Derivatives denied 505 retail clients important consumer protections after misclassifying them as wholesale clients. The affected users represented 83% of the company’s Australian client base.

The securities regulator asserted that the crypto company failed to provide the retail clients with a product disclosure statement, ensure its services were provided efficiently, honestly, and fairly, and make a target market distribution. Additionally, Binance Australia Derivatives did not comply with the conditions of its operating license and failed to implement a compliant internal dispute resolution system.

Due to Binance Australia Derivatives’ incompetence and failure to adhere to consumer protection rights, the firm’s clients were exposed to high-risk, speculative products and suffered significant losses. The ASIC mentioned that in 2023, it oversaw Binance, making compensation payments of roughly $13 million to the affected users.

Sarah Court, Deputy Chair of the ASIC, said: “Crypto derivative products are inherently risky and complex, so it is critical that retail clients are classified correctly. Those classifications ensure they receive the required consumer protections and the information required to make an informed investment decision.”

Reimbursing Victims

While the ASIC is seeking penalties, declarations, and adverse publicity orders against Binance Australia Derivatives, a complaint filing revealed that the exchange has paid approximately $8.29 million to the affected retail customers, including aggregate losses and fees.

“Many digital assets and related products are financial products under the current law. 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,” Court added.