Australia’s financial regulator has hit Binance’s Australian derivatives arm with a A$10 million ($6.8 million) penalty after finding onboarding failures that exposed retail customers to risky products and resulted in millions in losses.
Binance Admits Missteps In Australia
In a Friday release, the Australian Securities and Investments Commission (ASIC) said the Federal Court ordered Oztures Trading Pty Ltd, which trades as Binance Australia Derivatives and is part of the Binance Group, to pay the pecuniary penalty following admitted misconduct.
According to a Statement of Agreed Facts filed with the court, Binance misclassified more than 85% of its Australian client base as wholesale or professional investors between July 2022 and April 2023.
That misclassification allowed 524 retail customers to access “high‐risk” crypto derivative products without the consumer protections that Australian law requires, leading to more than A$12 million ($8,2 million) in client trading losses and fees.
ASIC’s review found a series of basic compliance shortcomings. Binance admitted it failed to provide retail clients with a Product Disclosure Statement, did not prepare a Target Market Determination, lacked a compliant internal dispute resolution system, and did not ensure that financial services were provided efficiently, and fairly.
The company also conceded it failed to meet conditions of its Australian Financial Services (AFS) licence and did not adequately train or ensure the competency of staff responsible for onboarding and client verification.
Regulators Find Serious Oversight Failures
Another troubling element highlighted was how Binance assessed customers’ eligibility for wholesale investor status. It is alleged that the exchange allowed prospective sophisticated investors to retake a multiple‐choice assessment repeatedly until they obtained a passing score, enabling applicants to game the process.
In at least one case cited by ASIC, a client was classified as a professional investor solely on the basis of self‐certifying as an “exempt public authority” without sufficient verification. Senior compliance personnel also failed to provide adequate oversight of applications and supporting materials, the regulator said.
Those classification failures had tangible financial consequences. The misclassified group collectively incurred A$8.66 million ($5.9 million) in trading losses and paid A$3.8 million ($2.6 million) in fees.
In 2023, ASIC oversaw approximately A$13.1 million ($9 million) in compensation paid to affected clients; the new court-ordered penalty is in addition to that compensation. Justice Moshinsky also ordered Binance to contribute to ASIC’s legal costs.
ASIC Chair Joe Longo described the breaches as more than mere technicalities. “Binance failed to set up basic compliance checks and incorrectly approved hundreds of applications for complex, wholesale investor products,” he said.
Longo added that the decision should serve as a warning to global financial services firms establishing operations in Australia: they must comply with the law from the outset and implement robust client onboarding procedures.
In tandem with the exchange’s fine, Binance Coin (BNB) — its native token — saw its price drop by 3% to $608 on Friday, amid a broader market correction.
Featured image from OpenArt, chart from TradingView.com
