The Australian Securities and Investments Commission said a targeted review on Binance was launched after the crypto exchange closed 500 positions opened by local users.
Binance closed these derivative positions after discovering that some traders were incorrectly categorized as wholesale investors.
The crypto exchange promised to compensate users for any losses incurred while trading derivatives and futures products on the platform.
The Australian Securities and Investments Commission (ASIC) said a targeted review on Binance was launched after the crypto exchange closed 500 positions opened by local users on February 23.
We are conducting a targeted review of Binance Australia Derivatives’ financial services business in Australia, including its classification of retail clients and wholesale clients.
On Thursday, the heavyweight crypto exchange tweeted that a “small number of Australian users who were incorrectly classified as wholesale investors” were discovered by the exchange’s Australian derivatives team.
The crypto exchange proceeded to liquidate some 500 positions, saying that the impacted users were notified and would receive full compensation for losses incurred from their trades.
Local laws mandate that traders under the wholesale category must boast extensive trading experience and have huge liquidity to open trades. Traders who do not meet the requirements are classified as retail users and cannot access derivatives products by law.
After the incident on Thursday, ASIC officials said a probe in the derivatives division at Binance was underway. The Australian regulator also noted that Binance was yet to report the incident “in accordance with its obligation under its Australian Financial Services License, Decrypt reported on Friday.
Binance Probed Across Borders
The leading exchange has faced scrutiny across several jurisdictions as some regulators tighten policies around crypto after 2022. Last year, a basket of digital asset stakeholders imploded, costing millions of retail and institutional investors billions of dollars.
Previous reports said that Changpeng Zhao’s company was assessing its position in the U.S. amid investigations from the watchdogs like the Commodity Futures Trading Commission (CFTC), the Internal Revenue Service (IRS), and the Department of Justice (DOJ). However, the exchange does not plan to exit America any time soon, per reports.