Australian court fines Binance $6.9 million for investor mislabeling

The Federal Court of Australia imposed an AUD 10 million (US$6.9 million) penalty on Binance Australia Derivatives for misclassifying 524 retail clients as wholesale investors, granting access to high-risk crypto derivatives without required consumer protections.

According to the Australian Securities and Investments Commission (ASIC), the misclassification occurred between July 2022 and April 2023. The entity operated as Oztures Trading Pty Ltd and held an Australian Financial Services license that was canceled at its request in April 2023 following a regulatory review. The court order follows Binance’s admissions in a Statement of Agreed Facts.

ASIC reported that affected clients incurred AUD 8.66 million (US$5.9 million) in trading losses and paid AUD 3.9 million (US$2.7 million) in fees. In 2023, ASIC oversaw about AUD 13.1 million (US$9 million) in compensation to those clients. The AUD 10 million court penalty is separate from those payments.

In the agreed facts, Binance acknowledged failures in client onboarding and staff training. Clients seeking sophisticated investor status could retake an online quiz an unlimited number of times until passing, and senior compliance staff provided limited oversight of applications and supporting documents, weakening classification controls.

Of the 524 misclassified clients, 460 were approved under the Sophisticated Investor Test, 33 under the Individual Wealth Test, and 26 did not provide sufficient evidence for the Professional Investor Test. The remaining five were misclassified under the Related Body Corporate Test and the Large Business Test, according to ASIC.

The company admitted six contraventions during July 2022 to April 2023: failing to provide a product disclosure statement to retail clients; failing to make a target market determination; failing to maintain a compliant internal dispute resolution system; failing to ensure financial services were provided efficiently and fairly; failing to comply with Australian Financial Services license conditions; and failing to adequately train employees.

Justice Moshinsky required the company to contribute to ASIC’s legal costs. Binance admitted all contraventions alleged by ASIC in civil proceedings initiated in December 2024.

In a statement, ASIC Chair Joe Longo described the impact: “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. This wasn’t just a technical breach — it directly resulted in over $12 million in client losses.”

In January, Binance Australia announced they restarted bank deposits and withdrawals for local users after a two-year cutoff.

Separately, in November 2023 the parent Binance Group reached a $4.3 billion settlement with the U.S. Department of Justice, and founder Changpeng Zhao pleaded guilty to violating the Bank Secrecy Act.