So, there were few aspects of CZ’s dispute with VC Giant Sequoia which many of us might be unaware of. While it got publicized and the huge buzz appeared on May 22, Binance CEO Changpeng Zhao hit his Twitter wall and penned his clarification.
A brief sneak peek of the incident
It was first reported on May 20 that the CZ seeks an unspecified ‘reasonable compensation’ from Sequoia Capital China for a reason that the firm hurt his reputation and also created barriers to raising fund at a favorable valuation. The Sequoia Capital China is a subsidiary of venture capital firm Sequoia Capital. However, the dispute began since December 2017 wherein according to Sequoia Capital China, CZ breached exclusively agreement by obtaining funds in Binance’s Series A round from IDG Capital. As a result, CZ couldn’t pursue any amount of funding until March 1, 2018. This gap was due to the order called ‘now-defunct injunction order’.
According to CZ, this ‘now-defunct injunction order’, CZ missed the better opportunity to raise new funding at a favorable valuation. And now the paper publicized on May 20th revealed that the first hearing of this case will be on June 25 this year.
CZ Reveals Crucial Points Behind the Scene
However, this is the ongoing scene familiar to many of us but CZ on May 23, 2019, revealed 10 points hidden behind the scene which thinks haven’t publicized yet.
In summary, the arbitration tribunal dismissed all of Sequoia’s claims.
He adds an injunction factor that was truly essential for Binance (it was the same year when Binance first emerged in the market) and according to him, it was the time when there was huge interest in Binance from other VCs and investors.
He adds that Sequoia’s serious allegations against him were made public but he wasn’t able to defend himself which led his reputational loss. He says;
The injunction and Sequoia’s serious allegations against me were made public, but I was not able to publicly defend myself because the arbitration was confidential.
However, later at the end of 2018, the case was finally dismissed on the Hong Kong Court’s claim that the injunction was an abuse of process..
The Hong Kong courts later determined that Sequoia’s actions in obtaining the injunction were an abuse of process. Late last year, the arbitration tribunal finally determined that all of Sequoia’s claims were completely without merit.
Finally, he won and the other party paid $2,400,000 in legal fees for their part. He notes that;
Sequoia (China) paid $2,400,000 in legal fees for their part and lost the case. I had to front USD $779,043 for over a year to cover my legal expenses, which eventually was paid by Sequoia because they lost. But I had to front it.
With all his points, CZ tried to point up the unprofessional behavior by VCs and what lacks in the current legal system. He concluded by adding;
We don’t just play defense. We fight for our industry.
Moreover, this led CZ to wrap up his elucidation by hitting blockchain based fundraising as the alternative solution of fundraising for entrepreneurs.