ASIC sues crypto-friendly broker eToro for offering “high-risk” products to unsuitable customers. Find out how contracts for difference (CFDs) sparked losses for nearly 20,000 Australian investors, and how eToro is responding in the face of the accusations.
In the tumultuous arena of crypto finance, broker eToro is now under fire from Australian regulators. The Australian Securities and Investments Commission (ASIC) announced on Thursday that it was taking legal action against eToro for offering “high-risk” products, such as contracts for difference (CFDs), to unsuitable customers.
eToro AUS, a revised determination!
“ASIC alleges that eToro’s target market for the CFD product was far too broad for a high-risk and volatile trading product, where most customers lose money, and that the selection test was wholly inadequate to assess whether a retail customer was likely to be in the target market,” ASIC’s official statement points out.
CFDs are financial instruments with a high risk of loss due to leverage. According to the regulator, nearly 20,000 Australian investors have suffered losses using these high-risk products.
ASIC Vice President Sarah Court expressed disappointment at the alleged lack of compliance in this case, given eToro’s market penetration and global brand awareness, both in Australia and around the world.
eToro, which has been offering its investment services for over 15 years, including in cryptocurrency since 2017, reacted in the press by stating that it had updated its offering.
“There is no impact or service interruption for eToro AUS customers or on eToro’s global operations. These procedures cover the period from October 5, 2021 to July 29, 2023. eToro AUS now operates with a revised target market determination in place for CFDs,” the broker said.
In recent months, ASIC has stepped up its actions against several companies offering services linked to digital assets, including the giant Binance, which has also recently been the target of prosecution. Rigorous regulatory oversight in the world of crypto finance continues to intensify, marking a turning point in the evolution of this ever-changing ecosystem.