With Bitcoin trading at record levels smashing through the $170,000-mark recently, and other cryptocurrencies such as Ethereum also rallying over the last few weeks, Australia’s corporate regulator has now stepped in and dragged major cryptocurrency exchange Binance to Federal Court for denying “consumer protections.”

The Australian Securities & Investments Commission (ASIC) says that more than 500 retail clients of Oztures Trading, trading as Binance Australia Derivatives (Binance), were denied important consumer protections after being misclassified as wholesale clients.

ASIC alleges that from 7 July 2022 to 21 April 2023, Binance offered crypto derivative products to 505 Australian retail investors who were misclassified as wholesale clients, representing 83% of its Australian client base.

 

The corporate regulator said that retail clients were protected under Australian financial services laws, and were required to be provided with a product disclosure statement and access to a compliant dispute resolution scheme. Additionally, Binance was also required to make a target market determination.

ASIC Deputy Chair Sarah Court said that Binance failed to ensure the services provided under its Australian financial services licence were provided “efficiently, honestly and fairly.”

“Our case alleges Binance’s compliance systems were woefully inadequate and exposed more than 500 clients to high-risk, speculative products without the right consumer protections in place.”

ASIC says that many of these clients suffered significant financial losses. Last year, it oversaw compensation payments by Binance of approximately $13 million to affected clients.

In December 2022, ASIC began reviewing Binance’s financial services business, including its classification of wholesale clients. On 6 April 2023, ASIC cancelled the AFS licence of Binance forcing all local investors to begin unwinding positions immediately.