Australia’s financial regulator will carry out a "targeted review’ into Binance’s derivatives business in the country after the company revealed it had classed some users incorrectly.

On Thursday, Binance tweeted that it had liquidated the positions of 500 of its users in Australia, after identifying an error in how the accounts were labeled.

“Our team identified a small number of Australian users who were incorrectly classed as ‘Wholesale Investors’ on Binance,” the exchange said.

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Under Australian law, a wholesale investor is someone who has more experience trading and potentially more funds to do so. If they do not meet the criteria to be a wholesale client, they are classed as retail traders, who are not allowed to trade derivatives.

The Australian Securities and Investments Commission (ASIC) extended a ban on the sale of binary option derivatives to retail investors last year, citing high rates of losses among traders.

In response to the announcement, ASIC said it was looking into Binance’s derivatives arm, and noted that it had not been contacted by the company directly about the error.

“ASIC is aware of Binance’s social media posts overnight stating that it had incorrectly classed a group of Australian consumers as wholesale investors,” an ASIC spokesperson said in a statement emailed to Decrypt. “It has not yet reported these matters to ASIC in accordance with its obligations under its Australian Financial Services Licence."

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“We are conducting a targeted review of Binance Australia Derivatives’ financial services business in Australia, including its classification of retail clients and wholesale clients,” the spokesperson said.

After discovering that the users had been mislabeled, Binance said it informed the 500 users affected and closed their positions with immediate effect. The company will also compensate them for any losses incurred while trading derivatives on Binance.

The company did not immediately respond to questions about whether it had been in contact with ASIC.

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