Binance Australia Derivatives sent an abrupt message to a select group of users on Feb 23, saying it would immediately close their accounts due to some users being falsely classified as “wholesale customers”.
This incident caused a flurry of user responses on social media, and the next day, the Australian Securities and Investments Commission (ASIC) announced that it would be conducting a “targeted review” of Binance’s local derivatives operations.
24, the review of Binance Australia Derivatives will include the company’s “classification of retail clients and wholesale clients”.
The spokesperson added:
“It has not yet reported these matters to ASIC in line with its obligations under its Australian financial services license.”
However, the spokesperson said that the regulator “is aware of Binance’s social media posts,” which were made shortly after users started posting screenshots of the warnings on Twitter.
Binance took to social media to clarify the incident, saying it had closed derivatives positions and accounts of some users that they misclassified as “wholesale clients”. Currently, the platform is only available to wholesale investors.
Related: SEC Files Objection to Binance.US Offer for Voyager Assets
A few hours after its initial posts, Binance said that 500 users were affected by the fix.
500 users were affected by this fix, which was a necessary action to ensure compliance with local laws. We serve over 120 million users worldwide and every user is important to us. We are in contact with affected users to agree on our compensation plans for them.
— Binance (@binance) February 23, 2023
A Binance spokesperson reiterated that the exchange is “committed” to adhering to local Australian laws.
Changpeng CZ Zhao, co-founder and CEO of Binance, tweeted that all users will be compensated for any losses and that they will ignore FUD. He also mentioned that the company is looking into the situation to see if reopening futures in Australia will be an option in the future.
Users will be compensated for any loss incurred due to forced closing of positions. Protecting users is priority #1 @Binance.
We will look into the situation and see if/when we can reopen futures offerings in Australia. Thank you for your understanding and please ignore FUD(4). https://t.co/dRG0u8VEuF
— CZ Binance (@cz_binance) February 23, 2023
The cryptocurrency exchange is currently the largest in the world and has been publicly publicizing its efforts to comply with regulatory requirements for its local operations.