Binance founder sued by Sequoia Capital after funding deal went off course!
Zhao Changpeng attained his billionaire status after founding the world’s largest crypto exchange, Binance. In a legal conflict that has surfaced recently, Sequoia Capital has sued him over a funding deal gone awry!
Binance, which is currently the world’s largest crypto exchange in terms of trading volume, was started about nine months ago. It soon rose to fame and attracted a huge number of users in a very short span of time. The astonishing uprising of Binance is one of the most remarkable growth stories in the crypto world.
This helped Zhao to land on the cover of the Forbes magazine and also to attain a billionaire status (he claims that his net worth is over $2 billion USD). Binance has also attracted scrutiny from regulators, who’ve been clamping down on digital-asset exchanges around the world, amid concerns that the venues may be flouting securities laws.
According to the Hong Kong court filings from March 26 and April 24, the conflict between Zhao and Sequoia is due to a funding deal going off track. The filings shed light on Zhao’s interactions with big-name venture capital firms and reveal details about how they’ve wrongly valued Binance.
The filings state how Zhao and Sequoia began negotiating terms of an investment in Binance in August. The deal would have given Sequoia a nearly 11 percent stake and valued the exchange at about $80 million.
As negotiations continued over the next few months, the crypto market hit its all-time highest during mid December. But during this time, the negotiations broke down. On Dec. 14, Zhao’s team told Sequoia that Binance’s existing shareholders thought their proposed deal undervalued the exchange.
At this point in time, Zhao was approached by another VC firm called IDG capital. However, the funding into Binance had high valuations, which were $400 million and $1 billion respectively.
This is where the real issue popped up. Zhao’s negotiations with IDG capital violated the agreements with Sequoia, and hence, he was sued by them. This is why Sequoia has turned to Hong Kong’s High Court to successfully secure an injunction barring Zhao from negotiating with other investors.
Image source: Bloomberg