Binance Digital Ltd – the world’s largest cryptocurrency exchange in terms of daily trading volumes – has been hauled to court in SA to thwart its attempt to force a business partner into arbitration which would keep its business conduct out of public attention, says a Daily Maverick report. 

Dimplx has brought an application to the Western Cape High Court in terms of section 163 of the Companies Act for relief from a broad range of conduct engaged in by Binance that Dimplx claims has had an unfairly prejudicial effect on its interests.

It claims arbitration on disputes in terms of its shareholders’ agreement with Binance would be ‘extremely inappropriate’ in this matter because the decisions taken by an arbitrator would then be foisted upon a court which will ultimately have to determine the outcome of the section 163 application.

Dimplx alleges that Binance has misled authorities and customers about its operations; contravened the UK’s anti-money laundering and counter-terrorist financing laws and regulations; amended and backdated changes to its terms and conditions to obfuscate the true UK domicilium of the group entity transacting with users of Binance.com; and channelled customers’ money into offshore bank accounts controlled by its founder, Changpeng Zhao.

The report notes Binance and Dimplx entered into a joint venture in SA and the UK in 2019, in which the latter is a 20% partner in Binance, with Zhao personally holding 80% shares of the company. The 20% shareholding is Dimplx’s main asset. 

Dimplx has two SA directors – Simon Dingle and Joshin Raghubar.

According to the DM, Dimplx said its relationship soured with Binance and Zhao after the other directors of Binance decided at a board meeting in June 2020 not to answer the UK's Financial Conduct Authority's questions and instead divert all of its customer accounts and business activities to a company of which Zhao was the sole shareholder.

It claims the business relationship between Dimplx and Binance deteriorated immediately after Dingle and Raghubar refused to consent to the course of action, which they regarded as being unlawful and designed to evade regulatory scrutiny.

Advocate Arnold Subel SC, for Binance, argued that the allegations made against his client were not only slanderous but that they were irrelevant: Dimplx is bound to its contract with Binance, which holds it subject to international arbitration because the majority partner is an internationally domiciled company registered in the Cayman Islands.

However, Advocate Richard Goodman SC, for Dimplx, suggested that the reason Binance’s legal team wanted to avoid filing an affidavit challenging his client’s money laundering allegations and headquarters was that ‘there’s no desire’ on the part of Binance to reply.

‘It simply does not want the affidavit to be admitted (to court), where that affidavit illustrates the wholesale conspiracy to evade whatever regulatory environment might otherwise be applicable.’

The court has reserved judgment.

Full Daily Maverick report