More than 500 retail clients of Oztures Trading Pty Ltd, trading as Binance Australia Derivatives (Binance), were denied important consumer protections after being misclassified as wholesale clients, ASIC alleges in documents filed in the Federal Court.
ASIC alleges 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.
Retail clients trading financial products, in this case, crypto derivative products, have important rights and consumer protections under Australian financial services laws. These include the requirement to be provided with a product disclosure statement and access to a compliant dispute resolution scheme. In addition, Binance was required to make a target market determination under design and distribution obligations.
ASIC Deputy Chair Sarah Court said Binance allegedly failed to ensure that the services it 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. Many of these clients suffered significant financial losses. In 2023, we oversaw compensation payments by Binance of approximately $13 million to affected clients.
'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, and the information required to make an informed investment decision.'
ASIC alleges Binance, in the period July 2022 to April 2023, failed to:
- give a Product Disclosure Statement to retail clients
- make a Target Market Determination
- have a compliant internal dispute resolution system
- do all things necessary to ensure that its financial services were provided efficiently, honestly and fairly
- comply with the conditions of its licence, and
- ensure that its employees were adequately trained and competent.
Earlier this month, ASIC released Consultation paper 381 Updates to INFO 225: Digital Assets: Financial Products and Services (CP 381) outlining proposals to update Information Sheet 225 Crypto Assets (24-266MR) to provide greater clarity about how the current financial product definitions apply to digital assets and related products.
'Many digital assets and related products are financial products under the current law. We are consulting with the sector to improve regulatory clarity, and ASIC will continue to use the full range of regulatory and enforcement tools to safeguard consumers and uphold market integrity in the digital asset sector,' Ms Court said.
ASIC will be seeking penalties, declarations and adverse publicity orders.
