The Australian division of social investment platform eToro (eToro Aus Capital Limited) has been sued by the nation’s markets regulator for allegedly breaking “design and distribution obligations and of eToro’s licence obligations to act efficiently, honestly and fairly”, The claims made by Australia’s Securities and Investments Commission (ASIC) concern eToro’s contract for difference (CFD) product, a leveraged derivative contract that enables a customer to speculatively bet on the fluctuation in value of an underlying asset like cryptocurrency.
Australia has pushed down on cryptocurrency companies in recent months, notably Binance Australia, whose offices were examined by ASIC. Major Australian banks have partially banned cryptocurrency due to “scams and the amount of money lost by customers.”
ASIC has filed lawsuits against BPS Financial, the business that created the qoin digital token, and Block Earner, a fintech company, for running deceptive advertisements around the time of FTX’s demise.
ASIC claims that between October 2021 and June 2023, nearly 20,000 of eToro’s clients lost money trading CFDs because the company’s target market was far too broad and its screening test was extremely difficult to pass.
The ASIC stated that a retail client who had a medium risk tolerance but was a novice investor and had no knowledge of the hazards associated with trading CFDs would still be considered part of the target market. “…clients were prompted if they chose answers that could cause them to fail, and they had complete freedom to change their responses.
“eToro AUS is taking the claims made by ASIC in these proceedings under consideration and will respond appropriately. There is no impact or disruption of service for eToro AUS clients, and there is no meaningful impact on eToro’s global business” , the company stated in a statement, adding that it is currently operating with a revised target market determination for CFDs. The Court has not yet set a date for ASIC’s request for financial penalties.