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Binance CEO Changpeng Zhao sues Sequoia Capital

Binance CEO is suing Sequoia Capital China which is among the largest and well-recognized venture funds highly focused on tech startups.
Binance CEO is suing Sequoia Capital China which is among the largest and well-recognized venture funds highly focused on tech startups.

Changpeng Zhao, the Binance CEO, is still reeling after the occurrence of a $40 million Bitcoin hack. Now the Binance CEO is suing Sequoia Capital China which is among the largest and well-recognized venture funds highly focused on tech startups. According to CrunchBase, the firm operates 22 funds globally and has raised $15.3 billion to date. The claims are that the capital damaged his reputation.

According to his 20th May legal filing in Hong Kong with the high court, Binance CEO had claims with Sequoia Capital China according to which they inhibited him from raising enough capital between 27th December and 1st March of 2018 at the peak of the bitcoin bull market.

 

Zhao wants an accounting of damages

Binance CEO pointed out that the injunction order had brought loss to him. He said that as a result of that, he was entitled to a reasonable amount of compensation by Sequoia. He went further saying that he specifically incurred a loss of opportunity to raise capital via successive rounds of funding at increasing high valuations.

Finally, it was the damage the capital had brought to his reputation. The CEO is seeking an undisclosed amount in damages. It is due to the fact that he is uncertain of the damages that he allegedly incurred.

On 7th May 2019, the exchange had also incurred a loss of around 7000 bitcoin as a result of hacking.

 

Hearing scheduled

On June 25, the high court in Hong Kong has set aside a hearing to analyze what damages Zhao incurred. Zhao claims that the injunction stopped him from being able to raise finance from other investors for 3 months till 1st March 2018.

A lawsuit was filed by Sequoia capital in March 2018 against Zhao accusing him of going against an exclusivity agreement. It was during the Binance’s Series A equity finance talks. This is what transpired; in August 2017, Sequoia agreed to invest in Binance with $8 million for an 11% share on the platform. At that moment, Sequoia had valued the crypto exchange to be at $80 million.

The respective parties continued to communicate over the next number of months. As of December 2017, Binance turned on the contract when the bitcoin price soared to almost $20000. The CEO’s team told Sequoia that their deal undermined Binance in respective of bitcoin’s meteoric price that spiked at that time.

Around that moment, Zhao initiated communicating with another distinct venture capital firm. It was IDG capital. IDG offered to create two rounds of money infusions into Binance at considerably better valuations: $400 million and $1 billion respectively. The deal is in contrast to the low-ball deal Sequoia presented.

Upon acknowledging of the secret talks Binance had with one of its rivals, Sequoia sued Zhao in 2018. The VC organization claimed Zhao went against his exclusivity agreement by sneaking talks behind their backs. Some nine months later in December 2018, the accusations against Zhao were dismissed at the Hong Kong International Arbitration Centre, (HKIAC). Currently, Zhao seeks to settle the score even by getting his pound of flesh.

At this juncture, it’s still unclear what loss Zhao has actually suffered. It is in consideration that Binance is the largest cryptocurrency exchange worldwide. Within the circle of the crypto ecosystem, Binance is the top dog; so definitely, Sequoia capital has not injured Binance’s business.

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Written by Layla Harding

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Bitcoin price was able to recover nicely after testing the $7500 level. BTC is facing a massive resistance around $7950 which might lead to another crash.

Bitcoin Price Analysis, 24th May: BTC going to crash downwards?

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