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Binance UK In Hot Water As Co-Owner Accuses The Exchange Of Misrepresenting Reports
Binance has been accused by the co-owner of a UK subsidiary of filing a “grossly inaccurate” annual report for one of the British entities associated with the world’s largest crypto exchange.
Andrew
7:22 13th Oct, 2022
Policy

Corporate statements raise questions about crypto exchange’s operations in Britain.

The directors of Dimplx, a UK company formed as part of a joint venture with Binance, said the 2020 financial statements for one of Binance’s UK companies “do not accurately report” the nature of its business, its turnover, assets and liabilities, “including potential tax liabilities”.

Dimplx, which made the allegation in its own filings this month to Companies House, the government’s main business registry, raised questions over the role UK companies played in Binance’s sprawling global operations in the run-up to the Financial Conduct Authority’s scathing warning against the crypto group last year.

The City regulator has repeatedly raised concerns about Binance, warning that its “complex and high-risk financial products [pose] a significant risk to consumers”. The FCA last year issued a consumer warning against Binance Markets Ltd, another UK subsidiary of the wider Binance Group, banning it from any regulated activities.

The FCA later said Binance had failed to provide basic information about its global operations, such as “trading names and functions for all group entities globally”. The exchange has said it intends to repair relations with the FCA and reapply for UK supervision.

Dimplx’s accusations turn the spotlight to a second UK entity, Binance Digital, and the nature of its activities in the UK running up to the exchange’s clash with the FCA. The claims against Binance by its former subsidiary co-owner have not been proved.

Binance and Dimplx embarked on a UK joint venture in 2019, but relations between the companies have since soured. Dimplx said it intended to sue Binance and over disputes arising from their business dealings, but declined to provide details of its claims.

Binance said: “In light of threats of litigation from the minority shareholders, Binance is not able to respond fully to the allegations. However, we understand that the minority shareholders are disappointed that the joint venture did not bear fruit.”

Binance Digital was incorporated in the UK in November 2019 as a “payment processing facilitator”, according to its annual reports. It is 20 per cent owned by Dimplx, a UK company created by two South Africa-based entrepreneurs, who describe it as a “joint venture company”. Binance founder Changpeng Zhao owns the majority stake.

Simon Dingle, a director of Dimplx, served on Binance Digital’s board until December 2020. In Dimplx’s annual report for the year to February 2021, Dingle and fellow director Joshin Raghubar allege a spate of inaccuracies in Binance Digital’s accounts for 2020.

The unit had been named as the entity “responsible for transactions” between crypto and all national currencies except the Turkish lira, according to archived copies of its terms and conditions on binance.com, the main website of the crypto exchange, used by investors to buy and sell cryptocurrencies such as bitcoin.

Binance’s filing suggested Binance Digital held roughly £100mn in “cash and/or bank balances” at the end of 2020, and that the same sum was owed to “creditors”.

The Dimplx directors said they believe that the £100mn represented balances held “on behalf of Binance Digital customers who had visited binance.com”. They said customers transacting on binance.com, would be “liable to pay transaction fees”.

However, Dimplx said, the financial statements recorded “zero turnover or fees in relation to any transactions conducted with any customer during the financial year”.

Binance would not say whether Binance Digital collected transaction fees from customers dealing on binance.com, and it declined to explain the source of the £100mn. Binance Digital’s 2020 accounts say that no turnover or revenue was recognised during the year, and the company paid no UK tax.



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