Sequoia Capital has sued Zhao Changpeng, founder of Binance, for breaching an exclusivity agreement.
According to a report by Bloomberg, Sequoia Capital filed suit against Zhao Changpeng on April 24th, 2018. The filings reveal the interactions Zhao and Binance had with some of the most prominent venture capital firms in finance.
There are many remarkable growth stories in the cryptocurrency industry, but Zhao and Binance’s meteoric rise is likely the current pinnacle. Zhao has become a cult figure in the industry, gracing the covers of popular tech magazines such as Forbes and amassing a personal fortune which he values at $2 billion.
Zhao and his company have not only attracted popular finance magazines from all parts of the world, they have also drawn scrutiny from regulators. Citing claims that they may be disregarding securities laws, regulators have been clamping down on crypto exchanges worldwide.
According to the Bloomberg report, Zhao and Sequoia Capital began negotiating terms for an investment in Binance in August, which would have given Sequoia an 11% stake in the exchange and valued Binance at about $80 million.
Talks advanced for some months, in which time prices of cryptocurrency also soared to all-time highs. However, negotiations between the two parties broke down in mid-December, around the time that Bitcoin peaked at a record $20,000 exchange rate.
On the 14th of December, Zhao’s team told Sequoia that Binance’s existing shareholders felt their offer hugely undervalued Binance.
From the Bloomberg report:
Around the same time, Zhao was approached by another Venture Capitalist firm, IDG Capital, with an offer that valued Binance at a higher valuation of $400 million and $1 billion respectively, after the injection of two rounds of funding.
The issue in court now is whether Zhao’s talks with IDG Capital violated the exclusive agreement he signed with Sequoia. While Sequoia and Zhao have been trying to settle their dispute through arbitration, the case became public when Sequoia secured a temporary injunction to bar Zhao from talking with other investors.