Binance CEO, Changpeng Zhao, founder of the world’s largest cryptocurrency trading platform Binance has been sued by a unit of Sequoia Capital, a VC firm after the negotiation deal regarding the exchange fell through between the two.
Binance CEO, Changpeng Zhao in legal trouble
Changpeng Zhao, the founder and CEO of the top cryptocurrency exchange, Binance has been stricken down with a lawsuit by a unit of Sequoia Capital. According to the court filings in Hong Kong on March 26 and April 24, the legal dispute between both the companies has been over a funding deal regarding the exchange gone wrong that brings an insight into the growing startup that shot to success in little time.
Binance, a cryptocurrency trading platform that was started just nine months ago by Zhao stands out with its overnight success story. In just a few months, the startup has been transformed into the world’s largest and number one cryptocurrency exchange by trading volume as per Coinmarketcap.
Zhao, who featured on the cover of Forbes magazine in February and has a personal fortune worth around $2 billion took Binance to great heights.
Sequoia sues Zhao over fallen exchange deal
As per the court filings, the negotiation of the Binance’s investment terms began in August between Zhao and Sequoia that would have valued the exchange at $80 million approximately while giving Sequoia an 11 percent stake in Binance. Over the next few months, when the cryptocurrency prices soared with bitcoin at its peak, the talks continued between the two companies.
However, in mid-December, Sequoia has been told by the Zhao team that the existing shareholders of the team believe the proposed deal was undervalued. About the same time, Zhao was approached by another Venture Capitalist (VC) firm, IDG Capital that offered two rounds of funding at $400 million and $1 billion.
Now, the problem is if Zhao’s conversation with IDG capital regarding the exchange deal violates his exclusivity agreement with Sequoia. Though Zhao and Sequoia planned to settle the dispute in arbitration, the issue became public when the latter went to the High Court of Hong Kong and secured a temporary directive that bars Zhao from negotiating with any other investors.
There has been no response from either of the side while IDG Capital says it has no relationship with the firm.
Last month, Binance captured the attention of Japan’s regulatory body FSA regarding licensing requirements as part of authorities’ strict control over cryptocurrency exchanges.
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