A legal tussle between Zhao Changpeng, founder of the world’s biggest cryptocurrency exchange, and Sequoia Capita,l is offering a rare glimpse into one of the digital-asset industry’s fastest-growing startups.
According to a report by Bloomberg published on Wednesday, Binance’s Zhao Changpeng is currently facing a lawsuit brought to the high court in Hong Kong by California-based venture capital firm Sequoia Capital.
Citing court documents dated Tuesday March 26th, the news source said the issue stems from a discussion of an injection of capital from Sequoia to Binance that started in August last year, when the platform was first launched.
As the talk continued, Zhao reportedly told Sequoia in mid-December – when the price of Bitcoin has surged to a record high of nearly $20,000 – that a proposed valuation of $80 million for an 11 percent stake in the firm would not match the expectations of the firm’s shareholders.
In this regard, the venture capital firm Sequoia Capital is suing the founder of Binance, the world’s largest cryptocurrency exchange, for allegedly violating an exclusivity agreement.
Deal Talks Go Awry
In the court documents, Sequoia claims that as the deal fell through, Zhao was also in talks with another potential investor – IDG Capital – which expressed interest in investing in Binance over two funding rounds. They evaluated the firm at $400 million and $1 billion, respectively. As such, Sequoia is accusing Zhao for breaching the claimed exclusivity agreement.
Bloomberg states that, although the firms planned to settle the matter in arbitration, Sequoia turned to the court to prevent Binance talking to other potential investors.
The court in Hong Kong has reportedly ordered Zhao not to talk to other investors until a hearing can be held to rule whether Zhao is liable over the allegations.
Bloomberg reports that Zhao didn’t respond to requests for a comment on the matter, while Binance’s spokesperson said they were not ready to comment on the matter at the time. Sequoia, which has also previously backed major tech-based companies like Google, Dropbox and Airbnb, also refused to comment on the matter. On their part, IDG told Bloomberg that it hasn’t invested in Binance and the two firms have no relationship whatsoever.
Since its inception in July, the trading platform’s meteoric rise has been one of the virtual currency industry’s most remarkable success stories, landing Zhao on the cover of Forbes magazine and helping him amass a personal fortune that he claims is worth as much as $2 billion. Although Zhao hasn’t provided any financial proof, he told Forbes that the exchange was valued at $3 billion.
Zhao has previously argued that Binance doesn’t need outside funding and only partners with venture capital companies that can help the exchange secure an operating licence, following stringent measures taken by regulators of late.
In efforts to expand to the European market, Zhao announced last month that Binance was setting up operations in Malta.
Do you think Binance is worth more than $3 billion as claimed by its founder, Zhao? Let us know in the comments section.