Binance UK Subsidiary Shareholder Alleges Inaccurate Filings in 2020

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. 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.

As per a Financial Times report, Dimplx’s annual report was filed to the UK Companies House registrar. Specifically, it states that Binance Digital’s “turnover, assets, liabilities, including potential tax liabilities, net profits, nature of operations and/or related party transactions, were not accurately represented.”

Company directors Simon Dingle and Joshin Raghubar claim several errors in Binance Digital’s 2020 financial statements in Dimplex’s annual report for February 2021. According to Binance’s statement, Binance Digital ended the year 2020 with around £100 million (roughly Rs. 919 crore) in “cash and bank balances”, and the same amount was owed to “creditors.”

The directors of Dimplex stated that they thought the £100 million (roughly Rs. 919 crore) reflected balances kept “on behalf of Binance Digital consumers who had visited binance.com” and would be “liable to pay transaction fees.” However, the financial accounts showed “zero turnover or fees” on client transactions recorded throughout the fiscal year.

Dimplx being a UK shareholder of the exchange, says that the misfiling of information was deliberate and also called into question financial statements for the period ending on April 14, 2022. As such, the shareholder has difficulty in “determining the present fair value of Dimplx Limited’s shareholding in Binance Digital.”

Binance has responded to the allegations, telling those over at CoinDesk that it was unable to respond fully to allegations and that it understands “that the minority shareholders are disappointed that the joint venture did not bear fruit.”

The fresh allegation raises 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) — UK’s financial regulatory body.

It is worth recalling that in June 2021, the FCA issued a consumer warning against Binance Markets, 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.

In February 2022, the FCA said it was concerned about the exchange’s deal with payments provider Paysafe. A month later, it raised more concerns about a partnership between Binance subsidiary Bifinity and financial services company EQONEX.