Binance Australia Derivatives fined $6.9 million over compliance and onboarding failures

The Federal Court has imposed an AUD 10 million ($6.9 million) penalty on the Australian derivatives arm of Binance, the world’s largest crypto exchange by trading volume, after the firm admitted to misclassifying retail clients as wholesale investors over a nine-month period.

The misclassification exposed 524 retail clients to high-risk crypto derivative products without the consumer protections required under Australian law, resulting in AUD 8.66 million ($5.9 million) in trading losses and AUD 3.9 million ($2.7 million) in fees, according to a statement by the Australian Securities and Investments Commission.

Binance Australia Derivatives, operating as Oztures Trading Pty Ltd, held an Australian Financial Services license until April 2023, when ASIC canceled the license at the entity’s request following a regulatory review. The parent Binance Group in November 2023 reached a $4.3 billion settlement with the U.S. Justice Department, with founder Changpeng Zhao pleading guilty to violating the Bank Secrecy Act.

Onboarding failures

According to a Statement of Agreed Facts filed in the Federal Court, Binance admitted to failures in client onboarding and staff training that allowed clients seeking sophisticated investor status to take a multiple-choice quiz an unlimited number of times until achieving a passing score.

The firm also admitted that senior compliance staff provided inadequate oversight of client applications and supporting documentation.

“Additionally, Binance’s senior compliance staff provided inadequate oversight or review of client applications and supporting documentation, further weakening the onboarding and classification processes,” the statement said.

ASIC Chair Joe Longo said the firm failed to set up basic compliance checks and incorrectly approved hundreds of applications for complex wholesale investor products.

“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,” Longo said in the statement. “This wasn’t just a technical breach — it directly resulted in over $12 million in client losses.”

Compensation and regulatory action

In 2023, ASIC oversaw approximately AUD 13.1 million ($9 million) in compensation payments to the affected clients. The AUD 10 million penalty imposed by the Federal Court is in addition to that compensation.

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

Per the statement, Binance admitted to six contraventions between July 2022 and April 2023, including failure to provide a product disclosure statement to retail clients, failure to make a target market determination, failure to maintain a compliant internal dispute resolution system, failure to ensure financial services were provided efficiently and fairly, failure to comply with AFS licence conditions, and failure to adequately train employees.

In addition to the pecuniary penalty, Justice Moshinsky ordered Binance to contribute to ASIC’s legal costs. The firm admitted to all contraventions alleged by ASIC in civil proceedings initiated in December 2024.

The Block reached out to Binance for comment.

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