Financial Regulator Reviews Binance Australia's Closure Of Some Users' Derivatives Accounts, Positions

Following the "abrupt" closure of derivatives accounts and positions of multiple Binance Australia users, the country's financial regulator, the Australian Securities and Investments Commission (ASIC), announced that it is currently conducting a "targeted review" on the issue.

The said review, according to an ASIC spokesperson, includes the exchange's "classification of retail clients and wholesale clients, Bloomberg reported Friday. The spokesperson also confirmed to the outlet that ASIC "is aware of Binance's social media posts overnight stating that it had incorrectly classed a group of Australian consumers as wholesale investors."

The financial regulator, however, said that Binance Australia "has not yet reported these matters to ASIC in accordance with its obligations under its Australian financial services license."

On Thursday, Binance Australia shared that it had closed the derivatives positions of several Australian users because they were incorrectly classified as wholesale investors instead of end users. The platform assured affected users that it will compensate any losses incurred because of the decision.

In a statement, Binance said at least 500 users were affected by the latest move but explained that it was necessary for local laws compliance.

The platform's statement and announcement immediately came after several users reported having received notifications from Binance Australia informing them that it started closing derivatives accounts and positions.

A Twitter user who goes by the handle @Mi_moidulislam1 shared the information on the social media platform along with the screenshot of Binance's notification to users and tweeted, "Binance closed derivative positions for many Australian users abruptly."

In a Thursday tweet, Binance explained the reason behind its sudden move. "Our team identified a small number of Australian users who were incorrectly classed as 'Wholesale Investors' on Binance," the platform said, adding that "as per Australian regulation, we were required to inform these users and close any of their derivative positions with immediate effect."

Following the announcement and before the ASIC released its official statement on the issue, Binance CEO Changpeng Zhao said that they "will review the situation and see if/when we can re-open futures offerings in Australia," urging users to "please ignore FUD."

"Users will be compensated for any loss incurred due to the force close of positions. Protecting users is #1 priority @Binance. We will review the situation and see if/when we can re-open futures offerings in Australia. Thank you for your understanding, & please ignore FUD (4)," the tweet read.

Binance is the world's largest cryptocurrency exchange platform by trading volume and has been under scrutiny by financial regulators over the past years.

The spectacular collapse of the crypto empire operating a crypto derivatives exchange FTX further made Binance the center of the regulator's heightened scrutiny.

Just recently, the SEC issued a Wells Notice to Paxos, the stablecoin issuer of the Binance-USD (BUSD), over securities concerns while the New York State Department of Financial Services (NYDFS) ordered Paxos to stop minting BUSD.