Australia takes Binance unit to court over consumer protection failures

(Reuters) -Australia’s corporate watchdog said on Wednesday that it has sued the local derivatives business of cryptocurrency exchange Binance, alleging that its retail customers were denied consumer protections after being misclassified as wholesale clients.

The Australian Securities and Investment Commission (ASIC) alleged that the unit offered crypto derivative products to 505 retail investors, about 83% of its local clientele, who were misclassified as wholesale clients between July 2022 and April 2023.

In April 2023, the ASIC had cancelled the financial services license of the unit, Binance Australia Derivatives, after conducting a “targeted review” of the cryptocurrency exchange.

In November 2023, the regulator oversaw compensation of about A$13.1 million ($8.29 million) to 435 retails clients, who had been incorrectly classified as wholesale.

“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,” ASIC Deputy Chair Sarah Court said.

The regulator said it will be seeking penalties, declarations and adverse publicity orders.

Binance did not immediately respond to a request for comment.

Earlier this month, Australia’s federal court had fined crypto exchange Kraken’s local operator to pay an A$8 million fine following the ASIC’s civil proceedings.

($1 = 1.5810 Australian dollars)