Venture Capital Giant Sequoia Sues Binance As Investment Deal Falls Apart

Chinese founder of the cryptocurrency exchange Binance, Changpeng Zhao is currently in trouble as one of the biggest venture capital firms ‘Sequoia Capital’ has sued the crypto exchange with charges of breach of an exclusive agreement.

According to the latest report from Bloomberg, Sequoia Capital has filed a lawsuit against Binance founder Zhao in Hong Kong court as per the filings dated March 26 and April 24.The court filings reveal that Sequoia and Zhao had started negotiating the terms of investment in Binance back in August 2017.

If the deal had happened at that very time, it would have given Sequoia an 11 percent stake in the crypto exchange that was valued at $80 million. However, as the talks between the two parties preceded further, Zhao told Sequoia in the mid of December, when Bitcoin was at its all-time high of $20000, that the previously agreed conditions would not match the expectations of the shareholders as they considered to be undervalued at that time.

The negotiations broke down and at the same time, Zhao was having a word with another venture capital firm, IDG Capital, as per the court filings. IDG Capital had put forward a proposal to Zhao of injecting two rounds of funding into Binance at very high valuations of $400 million and $1 billion respectively.

Now the issue is that whether or not Zhao’s talks with IDG capital has violated any exclusivity agreements between him and Sequoia. Although both Sequoia and Zhao tried to settle this matter in arbitration, the matter became public after Sequoia approached the Hong Kong court and secured an approval which bans Zhao from having any sort of discussions with other potential investors.

For now, the court has asked Zhao to refrain from having discussions with other investors until the dispute gets resolved.

Binance, which started its operations just nine months back has attained a meteoric rise to success during the crypto-boom of the last year. The success story of Binance has put Zhao on the Forbes magazine while making Zhao a billionaire with his personal fortunes going to $2 billion.

However, Zhao has been quite secretive about Binance’s operations and has declined to share any official financial statements and the proof of his personal wealth. He has also been keeping the location of his offices and servers secret.

Last month itself, having faced some regulatory conflict in Japan, the exchange announced shifting its operations to Malta.