Binance Australia Derivatives sent an abrupt message to a select group of users on February 23, saying it would immediately close their accounts for falsely classifying some users as “wholesale clients.”
This incident caused a lot of reactions from users on social media, and the next day, the Australian Securities and Investments Commission (ASIC) announced that it would conduct a “targeted review” of Binance’s local derivatives operations.
According to a statement from the regulator’s spokesperson on February 24, the review of Binance Australia Derivatives will include “a classification of retail clients and wholesale clients.”
A spokesperson added:
“It has not reported the matter to ASIC in accordance with its obligations under the Australian financial services licence.”
However, the spokesperson said the regulator was “aware of Binance’s social media post,” which was made shortly after users began posting images of the news on Twitter.
Binance took to social media to clarify the incident, saying it was closing positions and derivatives accounts for some users who were misclassified as “wholesale clients.” Currently the platform is only available to wholesale investors.
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A few hours after the initial post, Binance said 500 users were affected by the remediation.
500 users are affected by this remediation, which is a necessary action to ensure we remain in compliance with local laws. We serve more than 120 million users worldwide and every user is important to us. We are in contact with affected users to create a compensation plan for them.
– Binance (@binance) February 23, 2023
A spokesperson for Binance stated that the exchange is “committed” to complying with local Australian laws.
Changpeng CZ Zhao, co-founder and CEO of Binance, tweeted that all users will be compensated for their losses and ignore FUD. He also mentioned that the company is reviewing the situation to see if reopening futures in Australia will be an option in the future.
The user will be compensated for any loss due to the position being closed. Protecting users is our #1 priority @Binance.
We will review the situation and see if we can reopen the futures offering in Australia. Thank you for your understanding, & please ignore the FUD (4). https://t.co/dRG0u8VEuF
– CZ Binance (@cz_binance) February 23, 2023
Cryptocurrency exchanges are currently the largest in the world and have been very public about their efforts to comply with local operating regulatory requirements.