Australia appears to be reviewing the operations of crypto exchanges to protect its citizens from financial risks. In a recent development, Binance is under legal scrutiny for misclassified 505 retail investors. This is a legal challenge against Kraken a few days ago. Both Kraken and Binance are facing lawsuits from the Australian Securities and Investment Commission (ASIC), the regulator responsible for overseeing the country’s financial markets.
ASIC has filed a lawsuit in federal court, accusing Binance’s local subsidiary of classifying 505 retail investors as wholesale investors. As a result, the exchange allegedly failed to provide the consumer protections needed for these retail investors.
Retail crypto investors often buy less crypto assets, while wholesale investors are larger entities such as financial institutions or hedge funds. The two groups of consumer protection regulations vary according to the number and frequency of their crypto transactions.
According to an official statement from ASIC, Binance provides crypto derivatives to retail investors between July 7, 2022 and April 21, 2023.
According to Australian financial regulations, retail customers of licensed cryptocurrency exchanges must receive a product disclosure statement upon entry into the ecosystem. In addition, retail investors have the right to develop compliant dispute resolution plans.
Commenting on the matter, ASIC Vice Chairman Sarah Court said the second-hand equity violated Australian law it agreed to comply with when applying for an operating license in the country.
“Many of these clients have suffered significant financial losses. In 2023, we are responsible for compensation by donating approximately US$13 million (approximately Rs 11 crore) to affected clients. Crypto derivatives are inherently risky and complex , so it is crucial to correctly classify retail customers.”
According to ASIC, Binance failed to provide product disclosure statements to retail customers and did not implement a complaint resolution system.
Binance has not responded to development yet.
Earlier this year, Australia fined Kraken $5.1 million (about Rs 43 crore or Rs 80 crore) to violate the design and distribution of its products.
