Australian Securities and Investment Commission (ASIC) has sued one of the derivatives trading units of Binance that operated under the name of Binance Australia Derivatives. According to the filed lawsuit, the platform failed to provide its retail customers the protections required by the existing financial laws.
The trading platform did it by misclassifying 505 retail clients into wholesale customers between 7 July 2022 to 21 April 2023. Notably, this count represents 83% of its total clientele, the authority said. Given that, the firm offered derivative products without adhering to the necessary measures required by retail customers.
Speaking on the latest legal actions brought by authority, ASIC deputy chair Sarah Court added in a statement;
Our case alleges that Binance’s compliance systems were grossly inadequate, exposing more than 500 clients to high-risk speculative products without proper consumer protections. Many of these clients suffered significant financial losses,
ASIC deputy chair criticized the compliance system of Binance
Sarah continued by criticizing Binance’s compliance system and called it “woefully inadequate.” She revealed that improper user protections by the platform have led many investors to bear financial losses.
ASIC further pressed in the filing that retail customers are subject to stronger consumer protections. It includes customers having access to Target Market Determination (TMD), Product Disclosure Statement (PDS) and processes of internal dispute resolution.
According to the latest court filing, the derivative Binance platform violated multiple regulatory rules during the upper given time period. These included not providing PDS and TMD and non-compliance with the internal dispute resolution standards. Moreover, ASIC cited license condition violations, improper financial service, and inadequate employee training as the key infringements.
Crypto derivatives are fundamentally risky and complex investments. Therefore, accurate classifications are necessary for the users to enable them to make informed decisions. ASIC compelled stricter regulatory compliance in the digital assets industry, especially for the crypto-based financial products that have gained enough popularity.
Previously, the Australian federal court charged U.S-based crypto exchange Kraken $5.1 million in fines. The court alleged that Bit Trade, which operates Kraken Australia, failed to comply with design and distribution obligations.
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