The world’s largest crypto exchange has been accused of filing a “grossly inaccurate” annual report in 2020 by the co-owner of a Binance UK subsidiary called Dimplx. The Financial Times first reported the story.
Financial statements for one of Binance’s UK companies “do not accurately report” the nature of its business, the directors of Dimplx said, nor do they reflect its assets and liabilities, "including potential tax liabilities” and turnover.
Dimplx, which was formed as part of a joint venture with Binance in 2019, made the allegation in its own filings this month, raising questions about the role that UK companies played in Binance’s global operations in the period before its warning from the Financial Conduct Authority (FCA), a UK financial regulatory body.
In June 2021, the FCA issued a consumer warning against Binance Markets Ltd, a UK subsidiary of the Binance group, which banned it from engaging in any regulated activities in the UK. Binance had failed to provide basic information about its operations, such as “trading names and functions for all group entities globally,” the agency said.
Dimplx’s claims center on another UK entity, Binance Digital, which was incorporated in the UK in November 2019 as a “payment processing facilitator” according to its annual reports, and was “responsible for transactions” between crypto and all national currencies except the Turkish lira, according to archived copies of Binance’s terms and conditions.
In Dimplx’s annual report for the year to February 2021, company directors Simon Dingle and Joshin Raghubar allege that there were a spate of inaccuracies in Binance Digital’s accounts for 2020.
Binance’s filing suggests that at the end Binance Digital had roughly £100 million ($100 million) in “cash and/or bank balances” in 2020, and that the same sum was owed to “creditors.” The Dimplx directors said they believe the £100 million represented balances held “on behalf of Binance Digital customers who had visited binance.com,” who would be “liable to pay transaction fees.”
The financial statements, however, recorded “zero turnover or fees,” on any transactions recorded by customers during the financial year, Dimplx said. Binance Digital’s 2020 accounts say that no turnover or revenue was recognised during the year, and the company paid no UK tax.
Dimplx said that it plans to pursue litigation against Binance over disputes arising from their business relationship, but it did not provide details about its claims. Binance stated that in light of the threat of litigation, it would not be able to “respond fully to the allegations,” and added that “we understand that the minority shareholders are disappointed that the joint venture did not bear fruit.”
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