ASIC Targets Binance Australia Over Alleged Retail Investor Misclassification
Australia’s top securities regulator has taken legal action against Binance Australia Derivatives, alleging the crypto exchange improperly categorized hundreds of retail investors as wholesale clients and, as a result, denied them critical legal protections.
In a statement released Wednesday, the Australian Securities and Investments Commission (ASIC) said that between July 2022 and April 2023, Binance incorrectly classified more than 500 users—accounting for roughly 83% of its Australian client base—as wholesale investors. This misclassification, according to ASIC, excluded these customers from essential safeguards under Australian financial law.
Under local regulations, retail investors are entitled to consumer protections, including Product Disclosure Statements (PDS), Target Market Determinations (TMD), and access to an internal dispute resolution system. A PDS helps investors understand a product’s terms, risks, and benefits, while a TMD ensures financial products are offered only to suitable consumers.
ASIC contends that Binance’s approach left clients without these measures, potentially exposing them to speculative and complex crypto derivative products without adequate support. The agency further alleges the exchange breached multiple obligations tied to its Australian financial services license, including the requirement to operate honestly, fairly, and efficiently.
Additionally, ASIC claims Binance did not properly train its staff and that its internal compliance systems were insufficient, contributing to lapses in investor protection. According to the regulator, Binance ultimately compensated affected users with about $13 million in 2023.
Commenting on the lawsuit, ASIC Deputy Chair Sarah Court described the exchange’s compliance as “woefully inadequate.” She emphasized the importance of properly classifying retail investors, especially when it comes to high-risk crypto derivatives. “These classifications ensure people receive the consumer protections and information they need to make informed investment decisions,” Court said.
ASIC is now seeking penalties, declarations, and adverse publicity orders against Binance. In April, the agency revoked the exchange’s license following a targeted review initiated in February. The inquiry began after Binance publicly acknowledged on Twitter that it had mistakenly classified certain clients, prompting the immediate closure of their derivative positions.
By July 2023, ASIC had reportedly carried out searches at Binance’s local offices as part of its investigation into the now-shuttered derivatives division.
This lawsuit follows ASIC’s broader crackdown on the crypto industry. Just last week, the regulator fined Kraken’s Australian operator $5.1 million for unlawfully offering margin trading services to retail customers.
Continuing its efforts to refine oversight of digital assets, ASIC introduced the INFO-225 consultation paper earlier this month. The regulator plans to gather public feedback through February 2025 and issue updated guidance later in the year.