The Australian Securities and Investments Commission (ASIC) has commenced legal proceedings against cryptocurrency exchange giant, eToro. The suit focuses on eToro’s Contracts for Difference (CFD) products, with the regulator claiming that the company failed to conduct the necessary screening-tests for the reportedly “high-risk” derivatives contracts; prior to offering it to retail investors.
According to ASIC, CFD’s can include options for forex, individual stocks, commodities, cryptocurrencies and more, which, although some offer leverage of two-times on certain holdings, often leave up to 77% of retail investors with a surplus of losses when pursuing trading on eToro.
Going on to suggest, ASIC outlines the alleged breach even further, alleging that between October 2021 – June 2023, there were 20,000 eToro customers losing their hard-earned capital while trading.
The unexpected and harsh criticism coming just days after eToro achieved a secondary funding round; effectively achieving a $3.5 Billion valuation in exchange for $120m in shares from certain institutional investors. Consequently leaving several fearful that the looming lawsuit will influence the firm’s postn in the industry slightly.
