Chairman Gerald Krasner said: "The club are not in discussion with Mr Sainsbury. Yet again there was no proof of funds provided. We can only assume Mr Sainsbury is simply intent on damaging a deal with another consortium we are in advanced discussions with."
Krasner insisted negotiations with a local consortium of Leeds fans was more likely to happen.
Krasner added: "The negotiations with the local consortium of United fans are progressing well. The board hope it will come to fruition in the next seven to 10 days, at which time a further statement will be made."
Sainsbury is understood to have split with Nova Financial Partners and attracted European investment in order to fund the deal.
Sainsbury said: "The proof of funding will be supplied in a manner I know will totally satisfy the board of LUFC, and this will follow imminently."