Specific Review Into Binance Initiated By Australia’s Finance Regulator

Decrypt reported that after Binance acknowledged that some users were misclassified, Australia’s financial regulatory authority announced that it would conduct a “targeted review” of Binance’s derivatives business in the country. Binance liquidated 500 user positions in Australia on Thursday, after recognizing an error in how the accounts were categorized. 

The exchange explained that a few Australian users were incorrectly labeled as “Wholesale Investors,” and that, in accordance with Australian regulations, these users were informed and their derivative positions were closed immediately.

According to Australian legislation, a wholesale investor is an individual with more trading experience and potentially greater financial resources. If they do not satisfy the requirements to be classified as a wholesale client, they are categorized as retail traders who are prohibited from trading derivatives.

The Australian Securities and Investments Commission (ASIC) extended a prohibition on the sale of binary option derivatives to retail investors last year, citing high rates of losses among traders.

ASIC stated that it was investigating Binance’s derivatives business in response to the announcement, and noted that the company had not contacted them directly regarding the mistake.

An ASIC spokesperson said in an emailed statement to Decrypt, “ASIC is aware of Binance’s social media posts overnight indicating that it had misclassified a group of Australian consumers as wholesale investors. Binance has not yet notified ASIC of these issues in compliance with its obligations under its Australian Financial Services Licence.”

The spokesperson stated that they are carrying out a focused examination of Binance Australia Derivatives’ financial services business in Australia, specifically regarding the classification of retail clients and wholesale clients.

Binance informed the 500 affected users and closed their positions immediately upon discovering the mislabeling. In addition, the company will reimburse them for any losses incurred while trading derivatives on Binance.

It is unclear whether Binance has been in contact with ASIC, as the company did not respond to inquiries, Decrypt further reports.