A co-owner of Binance’s U.K. has criticised the cryptocurrency exchange for allegedly misrepresenting the shareholder’s ownership stake in formal company filings.
Directors of Dimplx, a shareholder in Binance Digital Limited claimed that Financial accounts submitted by Binance Digital Limited in 2020 are “grossly incorrect”.
In 2019, Binance and Dimplx began a joint venture in the UK, however since then, the firms’ relationships have soured. Dimplx stated that it planned to sue Binance and other parties involved in their business issues, but it would not elaborate on its accusations.
Binance said to Financial Times “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”.
Dimplx 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 UK regulator FCA has repeatedly raised concerns about Binance, warning that its “complex and high-risk financial products [pose] a significant risk to consumers”. Last year, the FCA warned consumers about Binance Markets Ltd., a different UK affiliate of the larger Binance business, and barred it from engaging in any regulated operations.
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 that it plans to ease tensions with the FCA and submit another application for UK supervision.
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According to its annual reports, Binance Digital was established as a “payment processing facilitator” in the UK in November 2019. Dimplx, owns 20% of it and Changpeng Zhao, is the largest shareholder.
In an annual report submitted on September 28 to the U.K. companies registrar, Dimplx directors claimed that “Binance Digital’s turnover, assets, liabilities, including potential tax liabilities, net earnings, nature of operations and/or related party transactions” were not fairly represented.
Binance filed in its statements that 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 asserted that they thought the £100 million represented balances maintained “on behalf of Binance Digital clients who had visited binance.com”. They thought customers using binance.com to transact would “be obliged to pay transaction fees”.
However Dimplx claims that the financial statements recorded “zero turnover or fees in relation to any transactions conducted with any customer during the financial year”.
Binance declines to disclose if Binance Digital collected transaction fees from users transacting on binance.com, as well as the origin of the £100 million. According to Binance Digital’s 2020 financial statements no turnover or revenue was recognised during the year, and the company paid no UK tax.
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