Australian ASIC sues eToro over contract for difference products.

ASIC sues eToro over CFD products.

Author: Amitoj Singh, CoinDesk; Translation: Song Xue, LianGuai

A news release on Thursday stated that eToro’s Australian entity (eToro Aus Capital Limited) has been sued by the country’s market regulator for alleged violations of “design and distribution obligations as well as eToro’s efficient, honest, and fair conduct obligations”.

The charges by the Australian Securities and Investments Commission (ASIC) involve eToro’s contracts for difference (CFD) products, which are leveraged derivative contracts that allow customers to speculate on the value fluctuations of underlying assets such as cryptocurrencies.

In recent months, Australia has cracked down on cryptocurrency companies, including Binance Australia, whose offices were searched by ASIC. The country’s major banks have imposed partial restrictions on cryptocurrencies citing “fraud and customer loss amounts”.

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During the collapse of FTX, ASIC sued fintech company Block Earner and the company behind the qoin digital token, BPS Financial, accusing them of running misleading advertisements.

ASIC stated that eToro’s target market is too broad and its screening tests are difficult to pass, with nearly 20,000 eToro customers incurring losses from CFD trading between October 2021 and June 2023.

ASIC stated, “For example, if a retail investor has a moderate risk tolerance but is not an experienced investor and is not aware of the risks of CFD trading, that customer still falls within the target market.” “…Customers can freely modify their answers and will receive prompts if the answers they choose could lead to failure.”

The company stated in a statement: “eToro AUS is considering the charges brought by ASIC in these lawsuits and will respond accordingly. The services for eToro AUS clients will not be affected or interrupted, and there will be no significant impact on eToro’s global operations.” Currently, the company is operating based on the revised target market for CFDs.

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