Binance founder Zhao Changpeng is being sued in a Hong Kong court by California-based venture capital investor Sequoia Capital over the collapse of a funding agreement between the parties, according to court filings dated March 26 and April 24.
Binance, currently the world’s largest cryptocurrency exchange by trading volume, was founded only nine months ago and has grown at an incredible pace. As a result, Zhao has become a billionaire and landed on the cover of Forbes. During its massive expansion, Binance attracted the interest of prominent VC outfits.
In August 2017, Zhao began talks with Sequoia over a deal that would have seen the latter invest about $80 million and receive an 11% stake in Binance. The parties remained in negotiations over the following months, but talks fell apart when the Bitcoin price hit a record high in mid-December. The main reason was apparently the concern of Binance shareholders that Sequoia was proposing a deal that undervalued the exchange. Meanwhile, Zhao entered into negotiations with another VC firm, IDG Capital, whose offer was far more generous: it would have invested in two rounds, one valuing Binance at $400 million and the other at $1 billion.
The problem is that Zhao’s parallel negotiations with IDG may have violated his agreements with Sequoia. The latter obtained a temporary injunction preventing Zhao from engaging with other VC firms.
Both Zhao and Sequoia declined to comment, while IDG told Bloomberg it had made no investments in Binance and had no relationship with the company.
Sequoia is headquartered in Menlo Park, California. It has invested in giants like Google, PayPal, Oracle, Apple, and Airbnb.
IDG Capital, which is run by San Francisco-based IDG Ventures, has over $20 billion in assets under management. Its investments include Baidu, Ripple, Circle, Xiaomi, and Tencent.
In March, Zhao said that Binance had plans to set up operations in Malta.