ASIC Files Lawsuit Against Binance Australia Over Consumer Protection Failures

Binance Australia Faces Legal Action Over Misclassification of Clients

The Australian Securities and Investments Commission (ASIC) has launched legal action against Oztures Trading Pty Ltd, operating as Binance Australia Derivatives, for alleged breaches of Australian financial services laws.

Announced on 18 December 2024, the lawsuit shines a spotlight on the operations of one of the world’s largest cryptocurrency platforms and its compliance practices in Australia.

24-283MR ASIC sues crypto company Binance Australia Derivatives for consumer protection failures | ASIC

ASIC

Misclassification of Clients

At the core of ASIC’s allegations is Binance’s misclassification of 505 retail clients as wholesale clients between 7 July 2022, and 21 April 2023.

This misclassification affected 83% of Binance’s Australian client base and denied these individuals the consumer protections afforded to retail clients under Australian financial services regulations.

Retail clients are entitled to safeguards such as a Product Disclosure Statement (PDS), access to compliant dispute resolution schemes, and a Target Market Determination (TMD) under design and distribution obligations.

By misclassifying clients, ASIC claims Binance failed to deliver these essential protections, exposing clients to high-risk, speculative financial products without appropriate oversight.

Alleged Regulatory Breaches

ASIC’s lawsuit details a series of alleged regulatory failures by Binance Australia. These include:

• Failure to Provide Consumer Protections: ASIC alleges that Binance did not issue a PDS or create a TMD for retail clients, both of which are critical for ensuring that financial products are suitable and transparent.
• Deficient Internal Dispute Resolution: Binance’s dispute resolution mechanisms allegedly did not meet compliance standards, leaving clients without adequate avenues to address grievances.
• Inadequate Employee Training: The company is accused of failing to ensure its staff were adequately trained and competent, a key requirement under its Australian Financial Services (AFS) license.
• Non-compliance with AFS License Conditions: ASIC claims Binance did not provide financial services efficiently, honestly, and fairly, violating its license obligations.

These breaches reportedly exposed clients to significant financial losses, with many engaging in high-risk derivative products without understanding the associated risks.

Compensation and Financial Losses

The fallout from Binance’s alleged non-compliance has been substantial. In 2023, ASIC oversaw compensation payments of approximately AUD 13 million to affected clients.

These payments reflect the financial harm suffered by retail clients who lacked the necessary protections to make informed decisions about speculative trading products.

In its lawsuit, ASIC seeks penalties, declarations, and adverse publicity orders against Binance Australia. The regulator’s objective is to hold the company accountable for its alleged failures and ensure greater compliance within the industry.