The Australian division of crypto giant Binance has been hit with a $10-million penalty (all figures in Australian dollars) for onboarding failures that allowed hundreds of retail investors to qualify as professional investors. Those investors incurred more than $12 million in trading losses and fees on crypto trades.
The Australian Securities & Investments Commission (ASIC) announced on Friday that the Federal Court of Australia ordered Oztures Trading Pty Ltd — which operates as Binance Australia Derivatives — to pay the penalty after the firm admitted to misclassifying hundreds of retail investors as professional clients over nine months (between July 2022 and April 2023), which exposed them to the high-risk crypto derivative products without required investor protections.
“Binance admitted to serious failures in client onboarding and poor staff training that allowed clients seeking to be verified as sophisticated investors to make unlimited attempts at a multiple-choice quiz until they achieved a passing score for Binance to assess them as qualifying for sophisticated investor status,” the ASIC noted.
Additionally, the firm’s senior compliance staff provided “inadequate oversight or review of client applications and supporting documentation, further weakening the onboarding and classification processes,” it said.
The retail investors that were improperly classified as professional investors suffered $8.7 million in trading losses, and paid $3.9 million in fees, the regulator said.
In 2023, the firm paid $13.1 million in compensation to affected clients. Now, the court has imposed an additional $10-million penalty, and the firm was ordered to contribute $200,000 to ASIC’s costs.
“Binance failed to set up basic compliance checks and incorrectly approved hundreds of applications for complex, wholesale investor products,” said Joe Longo, ASIC chair, in a release.
“Binance’s shortcomings left more than 85% of their Australian customer base exposed to high-risk products they should have never been able to access, and without important consumer protections or rights, costing retail investors millions,” he added. “This wasn’t just a technical breach — it directly resulted in over A$12 million in client losses.”